Iranian President Mahmoud Ahmadinejad has agreed "in principle" to Brazilian mediation to revive a U.N.-brokered nuclear fuel swap deal with world powers, the semi-official Fars news agency said on Wednesday.

The powers see the deal as a way to remove much of Iran's low-enriched uranium stockpile to minimize the risk of this being used for atomic bombs, while Iran would get specially processed fuel to keep its nuclear medicine program running.

But the proposal broke down over Iran's insistence on doing the swap only on its territory, rather than shipping its LEU abroad in advance, and in smaller, phased amounts, meaning no meaningful cut in a stockpile which grows day by day.

"In a telephone conversation with his Venezuelan counterpart, Ahmadinejad agreed in principle to Brazil's mediation over the nuclear fuel deal," Fars said, quoting a statement issued by Ahmadinejad's office.

A spokesman for Brazil's Foreign Ministry said Brazil had not offered to mediate a fuel swap agreement between Iran and the United Nations, but added "this does not mean that Brazil would not do so if other countries requested it."

Brazilian Foreign Minister Celso Amorim last week said during a visit to Tehran that Brazil wanted to see a revival of the fuel swap agreement to end Iran's standoff with the West.

The South American nation has said U.N. sanctions against Iran over its nuclear program could make the Islamic Republic more radical, but has also warned Ahmadinejad he will suffer the consequences if he seeks nuclear arms.

The pact conceived in talks conducted by the U.N. nuclear watchdog last October required Iran to ship 1,200 kg (2,646 lb) of its LEU, enough for one atom bomb if enriched to high grade, to Russia and France for conversion into fuel for the Tehran Research Reactor, which makes isotopes for cancer treatment.

The United States, France and Russia have ruled out rewriting the deal's conditions as Iran demands.

PUSH FOR U.N. SANCTIONS

The United States is lobbying U.N. Security Council members, to back a fourth round of international sanctions on Iran in the coming weeks, to press it into curbing uranium enrichment.

Iran says its nuclear energy program is designed to generate electricity only but its failure to declare sensitive atomic activity to the U.N. watchdog and continued restrictions on U.N. inspections have undermined confidence abroad.

Some non-permanent U.N. Security Council members such as Brazil and Turkey have been trying to revive the fuel deal in an attempt to stave off further sanctions against Tehran.

Brazil says it favors reviving a mooted compromise in which Iran could export its uranium to another country in return for nuclear fuel Iran says it needs to keep the Tehran reactor running.

It was not clear whether Ahmadinejad had agreed for the fuel swap to take place in a third country. If so, it would be a major shift in Iran's stance.

Gala Riani, analyst for IHS Global Insight Middle East, said Iran did not want to be seen as having closed the door to negotiations on the nuclear fuel swap.

But she said it remained to be seen if Tehran's announcement on Brazil's mediation was a real attempt to resolve the issue.

"Unless Iran proposes some significant concessions the likelihood (of a deal) is low," Riani told Reuters.

Iran started enrichment to 20 percent fissile purity in February, up from 5 percent, to create fuel for the research reactor itself, bringing Iran closer to levels needed for producing weapons-grade material -- uranium refined to 90 percent purity.

In a speech to a nuclear Non-Proliferation Treaty (NPT) review conference at the United Nations, U.S. Secretary of State Hillary Clinton said Monday that Iran's nuclear ambitions put the world at risk and called on nations to rally around U.S. efforts to finally hold the Islamic Republic to account.

Israel has suggested it could use military force to prevent Iran from developing nuclear weapons.

Ahmadinejad, interviewed on the ABC show "Good Morning America," said Tehran would "definitely continue" its nuclear program despite Israeli threats of military action. [ID:nN05173786]

The five permanent members of the U.N. Security Council -- the United States, Britain, France, Russia and China -- along with Germany are in talks over a broader sanctions resolution against Iran.

Russia and China, veto-wielding members of the council, have said they are willing to give Turkey and Brazil more time to resuscitate the nuclear fuel deal.

Chinese President Hu Jintao will likely discuss Iran's nuclear issue with Russian officials during his visit to Moscow on May 8, a Chinese official said Wednesday.

"On the Iran nuclear issue, it should be said, the positions of China and Russia are close," Chinese Assistant Foreign Minister Cheng Guoping said in Beijing.

Analyst Nicole Stracke at the Gulf Research Center in Dubai said Iran was trying to "send positive signals that it is ready to make concessions," aimed at splitting the Security Council and delaying Chinese and Russian agreement on new sanctions.

"... This strategy allows Iran to buy time, which is an essential factor in the technical development of the Iranian nuclear program," she told Reuters in an e-mail.

(Additional reporting by Fredrik Dahl in Dubai, Christopher Buckley in Beijing, Eduardo Simoes in Sao Paulo, Writing by Parisa Hafezi; Editing by Samia Nakhoul and Eric Beech )

Source: Reuters.com