"As we have said before, we will not give up our rights," Ali Akbar Salehi, head of Iran's Atomic Energy Organisation, was quoted by state-owned Iran newspaper on Thursday as saying.

"There is actually no need for us to enrich uranium to more than four or five percent purity as the reactors that we use need uranium enriched to a maximum of five percent," he said.

"So, enrichment to five percent is the highest level that we want for our reactors. But that does not mean that we will renounce our right to enrich uranium level to a higher level."

Diplomats say the UN atomic watchdog drew up a draft agreement on Wednesday for Russia to process Iranian low-enriched uranium to the 20 percent required by a research reactor in Tehran and for France to turn it into fuel form.

That followed two and a half days of talks in Vienna also involving the United States.

"Iran has the capability to enrich uranium to 20 percent but prefers to obtain the fuel from abroad," Salehi said.

"This policy has numerous hidden messages that I would rather not go into," he added, without elaborating.

Salehi said the volume of partly enriched uranium that would be sent abroad under the deal was "not large" and "not a big deal," but he did not elaborate.

Diplomats have said the document includes demands that Iran ship out most of its stockpile of low-enriched uranium for further processing by another country.

Uranium enrichment is the sensitive process that lies at the heart of Western concerns about Iran's nuclear programme. It produces fuel for civilian reactors, but in highly extended form can also make the fissile core of an atomic bomb.

International Atomic Energy Agency (IAEA) chief Mohamed ElBaradei has asked Iran and the major powers to give their views on the draft by Friday.

Russia warned that it was too early to draw conclusions on the extent of progress but said that the return to the negotiating table was positive.

Foreign ministry spokesman Andrei Nesterenko said in Moscow the talks "testify that we can resolve in a civilized and mutually respectful manner the questions that are a matter of interest for the participants."

However Iran's regional arch-foe Israel expressed scepticism about the negotiations.

"We must make sure that this is not a manoeuvre to gain time," the Yediot Aharonot newspaper quoted Deputy Defence Minister Matan Vilnai as saying.

"I am not underestimating the agreement, but we need to concentrate the pressure and keep it up at full intensity. Our goal is to neutralise Iran's ability to obtain nuclear weapons."

Interior Minister Eli Yishai said: "Israel is worried about the outcome of such an agreement.

"We hope that world leaders will not stick their heads in the sand and ignore the risks," he told public radio.

The sole if undeclared nuclear-armed state in the Middle East, Israel has never ruled out a resort to military action to stop Iran achieving a nuclear capability.

Both President Shimon Peres and Prime Minister Benjamin Netanyahu expressed concerns about the Vienna talks in meetings with the US ambassador to the United Nations, Susan Rice, who was wrapping up a three-day visit to Israel and the Palestinian territories on Thursday, public radio said.

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