An Iranian news report on Sunday quoted Tehran's foreign minister Manouchehr Mottaki as saying that the so-called Vienna group "has accepted" the presence of Brazil and Turkey in talks over a fuel swap.

But diplomats familiar with the dossier said no such formal decision had been made.

Under a deal brokered by the International Atomic Energy Agency (IAEA) last October, France, Russia and the United States proposed to Iran that it ship out most of its stockpile of low-enriched uranium for processing into fuel rods for a medical research reactor in Tehran.

But the Islamic republic cold-shouldered the proposal, insisting on a single, simultaneous fuel swap on its own territory instead, which was, in turn, unacceptable to the West.

After eight months of deadlock, Brazil and Turkey stepped in to draw up an alternative arrangement whereby the nuclear material would be transferred for safeholding in Turkey. In return, Iran would receive the fuel for its research reactor 12 months later.

But Moscow, Paris and Washington expressed reservations and, in a detailed response last month, asked Iran to clear up a number of questions they had about the deal.

The three powers were still waiting for Iran's response to their reservations, a Western diplomat told AFP, speaking on condition of anonymity.

"We presented Iran with feedback. We're now waiting for their reply before considering the next step," the diplomat said.

On Sunday, Iran announced that it has produced around 20 kilogrammes of 20 percent enriched uranium, in defiance of the world powers who want Tehran to suspend the controversial nuclear work.

"We have produced around 20 kilogrammes of 20 percent enriched uranium and we are working to produce the (fuel) plates," Iran's atomic chief Ali Akbar Salehi told ISNA news agency.

World powers led by Washington want Tehran to suspend its uranium enrichment activity which they suspect masks a nuclear weapons drive, and on June 9 backed a UN Security Council resolution for a fourth set of sanctions on Iran.

Enriched uranium can be used as fuel to power nuclear reactors as well as to make the fissile core of an atom bomb.

Tehran says its nuclear programme is entirely peaceful.

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