Iran on Tuesday began enriching uranium to 20 percent purity level at its Natanz plant in defiance of world powers but under the supervision of inspectors from the UN nuclear watchdog, state media said.
Al-Alam television quoted a source from Iran's atomic body as telling the state-owned Arabic language channel that "Iran has started enriching uranium to 20 percent in the presence of IAEA (International Atomic Energy Agency) inspectors at Natanz."
The United States and France said on Monday they will push for "strong" new UN anti-nuclear sanctions against Iran after Tehran announced it was going to step up its enrichment of uranium.
Iran's main enrichment facility is located in the central city of Natanz where sensitive atomic work has continued for years despite three sets of UN sanctions.
Iran on Monday formally told the UN nuclear body of its plan to produce higher enriched uranium, sparking sanctions warnings by world powers who want Tehran to enter a fuel swop deal designed to allay their fears about the Islamic republic's nuclear programme.
World powers led by Washington suspect Tehran is enriching uranium to make atomic weapons as the material in high purity form can be used in the fissile core of a nuclear bomb.
Iran denies the charge, saying it is enriching uranium for peaceful purposes only and specifically wants to process it to 20 percent level so it can be used as fuel to power a research reactor in Tehran which makes medical isotopes.
An IAEA-brokered deal envisages Tehran being supplied with nuclear fuel for the reactor in exchange for its low-enriched uranium (LEU).
The deal has hit a roadblock as Tehran, although saying it is ready "in principle" to sign on to it, insists that not all its LEU be shipped out in one go.
President Mahmoud Ahmadinejad on Sunday ordered Iran's atomic chief Ali Akbar Salehi to begin enriching uranium to 20 percent, saying world powers had not agreed to Tehran's conditions for the deal.
French President Nicolas Sarkozy and US Defence Secretary Robert Gates in talks in Paris on Monday "agreed that the time has come for the adoption of strong sanctions, in the hope that dialogue will be resumed," an official at the French presidency said.
Gates, whose aides said earlier the United States would ask France to submit a sanctions motion at the UN Security Council, which it currently chairs, said: "We are very much agreed that action by the international community is the next step."
In Washington, a US official said Iran's high enrichment plan was "a provocative move in defiance of UN Security Council resolutions."
"The Iranian government knows that this will not meet the humanitarian needs of the Iranian people, and risks creating more regional instability," the official said, on condition of anonymity.
"If the Iranian government takes this step, it would further undermine confidence and raise serious concern about Iran's nuclear intentions."
Ehud Barak, defence minister of Israel which is widely believed to be the Middle East's sole if undeclared nuclear-armed power, told a meeting of his Labour party that new sanctions were needed.
He said Tehran's enrichment decision was "further proof that Iran is deceiving the whole world and the correct response is to begin a determined campaign of decisive and permanent sanctions against Iran."
Neither the United States nor Israel has ruled out taking military action against Iran's nuclear facilities.
IAEA chief Yukiya Amano "noted with concern this decision, as it may affect, in particular, ongoing international efforts to ensure the availability of nuclear fuel for the Tehran research reactor," his agency said.