Iran says starts making 20 pct nuclear fuel

A senior lawmaker in Russia, which in the past has urged talks rather than punishment, also said economic measures should be considered against Iran, a major oil producer.

Among the big powers only China, which can block any U.N. sanctions, has remained unswervingly opposed to punishing Iran.

On Tuesday Beijing urged increased diplomatic efforts to resolve the stand-off over Iran's nuclear plans, calling for all sides to work towards agreement on the fuel exchange plan.

"This would help towards appropriately resolving the Iran nuclear issue," Foreign Ministry spokesman Ma Zhaoxu said.

Possible targets for any new sanctions include Iran's central bank, the Revolutionary Guards who Western powers say are key to Iran's nuclear programme, shipping firms and its energy sector, Western diplomats say.

Enriching uranium to 20 percent would take Iran much of the way to having weapons-grade uranium.

But analysts said it would need a few months to reconfigure its Natanz plant to refine uranium to higher purity.

Iran may also be having more difficulty obtaining crucial components due to U.N. sanctions, said the analysts, who added that the latest move might be a negotiating tactic.

Tehran says the more highly refined uranium is destined for the research reactor, but it lacks the technology to convert the material into special fuel needed to run this plant in the capital.

Iran's Foreign Ministry spokesman said Tehran was still prepared to carry out the fuel swap, if its conditions were met.