Ali Asghar Soltanieh, envoy to the International Atomic Energy Agency (IAEA), reiterated that Tehran is ready for further talks on supplying fuel for the internationally supervised reactor in the capital.

"The main issue is how to get a guarantee for the timely supply of fuel which Iran needs," Soltanieh was quoted as saying by ISNA news agency.

"We are ready to have negotiations with a positive approach, but because of lack of confidence with the West, we need to have those guarantees."

He spoke days after the Islamic republic rejected a deal brokered by the IAEA which proposed that Tehran send most of its stock of low-enriched uranium (LEU) to Russia and France for conversion into fuel for the research reactor.

However, Iran said it was ready for a simultaneous exchange inside the country of its LEU for nuclear fuel supplied by the West.

Western powers strongly back the IAEA-drafted deal as they fear Iran could further enrich its LEU for use in making atomic weapons, a charge Tehran denies.

A senior US official on Sunday urged Iran to "engage" with the West over its nuclear programme.

"We would prefer that the Iranian regime follow through on the opportunity to engage," Ellen Tauscher, Under Secretary for Arms Control and International Security at the State Department, told the Halifax International Security Forum in Canada.

"If persuasion doesn't work, pressure is going to have to be the next line of action," she warned in a reference to possible further sanctions.

But, she added, "I don't believe (military action against Iran) is on the table now."

The United States and Israel have never ruled out military action to prevent Iran acquiring a bomb. Israel is widely suspected to be the Middle East's sole -- albeit undeclared -- nuclear-armed power.

A commander of Iran's elite Revolutionary Guards said on Sunday that its air defences would annihilate Israeli warplanes if they attacked.

"Their F-15 and F-16 fighters will be trapped by our air defence forces and will be annihilated," Guards' air wing chief Amir Ali Hajizadeh told Fars news agency as war games aimed at honing a response to any assault on Iran's nuclear sites began.

"Even if their planes escape and land at the bases from which they took off, their bases will be struck by our destructive surface-to-surface missiles."

An aide to supreme leader Ayatollah Ali Khamenei said on Saturday that if Iran was attacked, it would retaliate against Tel Aviv in Israel.

Enrichment lies at the heart of the Iran nuclear controversy. Enriched uranium can be used to power reactors, but in purer form it can also be used in the fissile core of an atomic weapon.

Soltanieh said that under IAEA rules, member states can enrich uranium to any level.

"There is no limit to enrichment for members of the IAEA. There is no ceiling," he said. "The member countries are however required to declare to the agency their enrichment levels and the agency has to verify it."

He clarified that Iran's main enrichment plant in the central city of Natanz was enriching uranium to five percent purity.

Iran is building a second enrichment plant near the holy city of Qom. Its disclosure in September triggered outrage in the West, prompting world powers to threaten fresh sanctions if Tehran did not come clean on its atomic project.

Tehran is already under three sets of UN sanctions for enriching uranium at Natanz.

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