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By Parisa Hafezi
TEHRAN (Reuters) - Iran ruled out on Wednesday sending enriched uranium abroad for further processing, but would consider swapping it for nuclear fuel provided it remained under supervision inside the country, the ISNA news agency said.
The decision is expected to anger the United States and its allies, which had called on Iran to accept a deal which aimed to delay Tehran's potential ability to make bombs by at least a year by divesting Iran of most of its enriched uranium.
A draft deal brokered by the U.N. nuclear watchdog, the International Atomic Energy Agency (IAEA), calls on Iran to send some 75 percent of its low-enriched uranium to Russia and France, where it would be turned into fuel for a Tehran medical research reactor.
"Surely we will not send our 3.5 percent fuel abroad but can review swapping it simultaneously with nuclear fuel inside Iran," Foreign Minister Manouchehr Mottaki told the ISNA students' news agency.
The United States has rejected Iranian calls for amendments and further talks on the deal. President Barack Obama said time was running out for diplomacy to resolve a long standoff over Iran's nuclear programme.
Mottaki criticised Washington for pressuring Iran to accept the deal. "Diplomacy is not black or white. Pressuring Iran to accept what they want is a non-diplomatic approach," he said.
Russia and France, which are both also involved in the fuel proposal, also pressed Iran to accept it as is. Tehran faces possible harsher international sanctions and risks even Israeli military action to knock out its nuclear sites.
Iran says it needs nuclear technology to generate power but its history of secrecy and restricting U.N. inspections have raised Western suspicions of a covert quest for atom bombs.
Tehran has repeatedly said it preferred to buy reactor fuel from foreign suppliers rather than part with its low enriched uranium (LEU) -- also bomb material if refined to high purity.
EXPERTS TO EVALUATE
Iranian pledges in Geneva talks with six powers on October 1 won Tehran a reprieve from sanctions targeting its oil sector, but Western nations stressed they would not wait indefinitely for it to follow through.
Iran had previously indicated that it may agree to send only "part" of its stockpile in several shipments.
Should the talks fail to help Iran obtain the fuel from abroad, Iran has threatened to enrich uranium from the 5 percent level up to the 20 percent threshold needed for the reactor fuel. For bombs, uranium needs to be refined to 90 percent.
Enrichment above 5 percent would ring Western alarm bells since Iran is not known to have the technology for converting the material into fuel plates for the medical reactor. Only France and Argentina have that know-how, Western officials say.
If 70 percent of Iran's uranium is exported in one shipment, or at the most two shipments in quick succession, Tehran would need about a year to produce enough uranium to again have the stockpile it would need for a weapon.
IAEA chief Mohamed ElBaradei has been seeking compromises to rescue the deal, including Iran parking its LEU in a third country, pending delivery of reactor fuel. Turkey says it would be willing to store Iran's enriched uranium.
Mottaki did not say what would happen to the low-enriched fuel it was prepared to swap, but authorities have said in the past that it could be stockpiled in Iran under IAEA supervision.
Asked about Mottaki's remarks, Iran's ambassador to the IAEA Ali Asghar Soltanieh said Tehran wanted a guarantee that it would receive fuel it contracted for.
He recalled that Tehran once paid the United States and France to provide nuclear fuel but it was never delivered because of the 1979 Islamic Revolution.
"We never got the fuel or our money back. So a guarantee is now the pivotal issue for us. More than 200 hospitals in Iran depend on this reactor," Soltanieh told reporters after an informal meeting of IAEA governors in Vienna.
"We are ready for a second round of negotiations to finalise this matter. But we want a 100 percent guarantee."
(Additional reporting by Mark Heinrich in Vienna; Editing by Jon Hemming/David Stamp)