The United States and France have said new sanctions against Iran are the only option after Tehran informed the International Atomic Energy Agency (IAEA) that it will begin enriching higher-grade nuclear fuel to a level of 20 per cent.
Nicolas Sarkozy, the French president, and Robert Gates, the US defence secretary, said that Iran should face "strong sanctions" over its nuclear programme, a French official said following a meeting between the two men in Paris.
Earlier on Monday, Ali-Asghar Soltanieh, Iran's envoy to the IAEA, said that Tehran had handed an official letter to the UN's atomic agency saying that his country would begin enriching the fuel from Tuesday.
Soltanieh said that Iran would use its nuclear stockpile to enrich uranium to supply its Tehran research reactor which produces medical isotopes.
Earlier, speaking to al-Alam, Iran's Arabic-language state television station, Ali Akbar Salehi, the head of the country's atomic energy organisation, said Tehran planned to build 10 new facilities over the next year where the enrichment could be carried out.
Iran had said in November that it planned to build the enrichment plants but had not given a timescale.
Bernard Kouchner, the French foreign minister, said on Monday that he did not believe Iran had the ability to raise the enrichment level of its uranium and that the move by Tehran was "blackmail".
"One could call it diplomacy, but if that is what is then it is truly negative," said Kouchner.
"That is not serious and we, alas cannot apply anything other than sanctions since negotiation is not possible."
Gates also said more pressure had to be applied to the Iranian government.
"We must still try and find a peaceful way to resolve this issue," Gates said.
"The only path that is left to us at this point, it seems to me, is that pressure track but it will require all of the international community to work together."
Asked about the possibility of an Israeli strike on Iran over its nuclear programme, Gates said: "Everybody's interest is in seeing this issue resolved without a resort to conflict."
Kouchner said all the major powers apart from China were in favour of a fourth round of UN-backed sanctions.
However, he said there was no deadline for reaching an agreement and added that he did not fear that any Israeli action was imminent.
Western powers accuse Iran of attempting to build nuclear weapons but Tehran says its nuclear programme is for purely civilian purposes.
Alireza Ronaghi, Al Jazeera's correspondent in Tehran, said: "It's a new phase in Iran's nuclear achievement, but it is not going to happen overnight.
"A very difficult design process will have to take place. They'll need to change the existing capacity that consists of 4,000 - 5,000 centrifugal machines.
"It will also infringe upon Iran's current capacity for enriching uranium to a level of 3.5 - 4 per cent, which is necessary for its current nuclear programme.
"Regardless, these are the things that many conservatives in Iran think will make the country's hand stronger in negotiations with the West."
Mahmoud Ahmadinejad, Iran's president, on Sunday instructed Salehi to start the production of higher-grade nuclear reactor fuel.
But Salehi has also suggested that production would be halted if Iran received fuel enriched to 20 per cent from abroad.
Iran has expressed its readiness to exchange its low-enriched uranium for higher-grade fuel, but has demanded amendments to the UN-drafted IAEA plan, under which Iran would export its low-enriched uranium abroad for enrichment.
"Iran would halt its enrichment process for the Tehran research reactor any time it receives the necessary fuel for it," Salehi said.
The UN plan was drawn up in early October in a meeting in Geneva, Switzerland, between Iran and six world powers - the UK, China, France, Russia, the US and Germany - and later refined at a meeting in Vienna.
The talks in the Austrian capital came up with a draft proposal that would take 70 per cent of Iran's low-enriched uranium to reduce its stockpile of material that could be enriched to a higher level, and possibly be used to make nuclear weapons.
That uranium would be returned about a year later as refined fuel rods, which can power reactors but cannot be readily turned into weapons-grade material.
Ahmadinejad had last week appeared to support the deal in an interview on state television, but on Sunday he blamed the West for the stalemate over the deal.