Iran proclaimed advances in nuclear know-how, including new centrifuges able to enrich uranium much faster, a move that may heighten its confrontation with the West over suspicions it is seeking the means to make atomic bombs.
Tehran's determination to pursue a nuclear programme showed no sign of wavering despite Western sanctions that are inflicting increasing damage on its oil-based economy.
The era of bullying nations has passed. The arrogant powers cannot monopolise nuclear technology. They tried to prevent us by issuing sanctions and resolutions but failed, President Mahmoud Ahmadinejad said in a television broadcast on Wednesday.
Our nuclear path will continue.
But Iran's Arabic-language Al Alam television said the government had handed a letter to EU foreign policy chief Catherine Ashton expressing readiness to hold new talks over its nuclear programme in a constructive way.
An Ashton spokeswoman confirmed receipt of the letter, saying she was evaluating it and would consult the United States, Russia, China and other partners among the big powers.
Iran has long refused to negotiate curbs on its nuclear programme, saying it is intended purely for civilian uses, including producing electricity for booming domestic demand.
The United States and Israel have not ruled out military action against Iran if diplomacy and sanctions fail.
Washington played down Iran's announcement, saying the advances were neither new nor very impressive. We frankly don't see a lot new here. This is not big news. In fact it seems to have been hyped, a State Department spokeswoman said.
IRAN DENIES BANNING OIL EXPORTS TO EU
Iran's Oil Ministry denied a state media report that it had cut off oil exports to six EU states. We deny this report ... If such a decision is made, it will be announced by Iran's Supreme National Security Council, a ministry spokesman said.
Iran's English language Press TV had said Tehran had halted oil deliveries to France, Portugal, Italy, Greece, Netherlands and Spain -- its biggest EU customers -- in retaliation for an EU ban on Iranian crude due to take effect in July.
The Islamic Republic is the world's No. 5 oil exporter, with 2.6 million barrels going abroad daily, about a fifth of it to EU countries.
Western sanctions are spreading to block Iran's oil exports and central bank financing of trade, and Tehran has resorted to barter to import staples like rice, cooking oil and tea, commodities traders say.
The Obama administration is putting pressure on the European Union and SWIFT, the global organisation that facilitates most of the world's cross-border payments, to expel Iranian banks from its network, a new step in the push to deprive Iran of funds, a U.S. official said on Wednesday.
Expelling Iranian banks from the Belgium-based Society for Worldwide Interbank Financial Telecommunication would cut off one of Iran's few remaining avenues to do business abroad.
European banking regulators may meet SWIFT's board on Thursday to discuss the issue, two sources familiar with the matter said. SWIFT has said previously it is working to resolve the issue but is just a messaging system for its 10,000 users.
The most recent talks between world powers and Iran failed in January 2011 because of Tehran's unwillingness to discuss transparent limits on enrichment, as demanded by several U.N. Security Council resolutions passed since 2006.
The nuclear achievements proclaimed by Tehran involved a new line of uranium enrichment centrifuges and the loading of its first domestically produced batch of fuel into a research reactor that is expected to run out of imported stocks soon.
Tehran has for some years been developing and testing new generations of centrifuges to replace its outdated, erratic P-1 model. In January it said it had successfully manufactured and tested its own fuel rods for use in nuclear power plants.
FOURTH GENERATION CENTRIFUGE
Ahmadinejad said the fourth generation of centrifuge would be able to refine uranium three times as fast as previously.
If Iran succeeded in introducing modern centrifuges for production, it could significantly shorten the time needed to stockpile enriched uranium, which can generate electricity or, if refined much more, produce nuclear explosions.
Last year, Iran installed two newer models for large scale testing at a research site near the central town of Natanz.
But it remains unclear whether Tehran, under increasingly strict trade sanctions, has the means and components to make the more sophisticated machines in industrial quantity.
We have seen this before. We have seen these announcements and these grand unveilings and it turns out that there was less there than meets the eye. I suspect this is the same case, said Shannon Kile at the Stockholm International Peace Research Institute (SIPRI).
However, Ahmadinejad said Iran had increased the number of centrifuges at its main enrichment site at Natanz to 9,000.
In its last report on Iran, in November, the U.N. nuclear watchdog said there were 8,000 installed centrifuges at Natanz, of which up to 6,200 were operating.
France said Tehran's latest moves again demonstrated that it would rather ignore international obligations than cooperate.
A British Foreign Office spokesman said: (This) does not give any confidence that Iran is ready to engage meaningfully on the international community's well-founded concerns about its nuclear programme. Until it does so we'll only increase peaceful and legitimate pressure on Iran to return to negotiations.
Russia said global powers must work harder to coax concessions from Iran, warning that Tehran's willingness to compromise was waning as it makes progress toward the potential capability of building nuclear warheads.
Deputy Foreign Minister Sergei Ryabkov said U.N. sanctions and additional measures introduced by Western nations had had zero effect on Iran's nuclear programme.
Iran has threatened retaliation for any attack or effective ban on its oil exports, suggesting it could seal off the main Gulf export shipping channel, the Strait of Hormuz, used by a third of the world's crude oil tankers.
NEW FUEL FOR RESEARCH REACTOR
State television aired live footage of Ahmadinejad loading Iranian-made fuel rods into the Tehran Research Reactor and called this a sign of Iranian scientists' achievements.
The Tehran reactor produces radio isotopes for medical use and agriculture. Iran says it was forced to manufacture its own fuel for the reactor after failing to agree terms for a deal to obtain it from the West.
In 2010, Iran alarmed the West by starting to enrich uranium to a fissile purity of 20 percent, saying this was for reprocessing into special fuel for the Tehran reactor.
A 3.5 percent level is enough to power nuclear power plants, and the move to 20 percent purity brought Iran significantly closer to the 90 percent needed for a nuclear warhead.
Analysts remained doubtful that Iran would be able to operate the research reactor with its own special fuel.
As usual, the announcement surely is exaggerated. Producing the fuel plates ... is not so hard. But the plates have to be tested for a considerable period before they can be used safely in the reactor, said Mark Fitzpatrick of London's International Institute for Strategic Studies.
If Iran is really running the reactor with untested fuel plates, then my advice to the residents surrounding the building would be to move somewhere else. It will be unsafe.
Spent fuel can be reprocessed into plutonium, the alternative key ingredient in atomic bombs. But Western worries about Iran's nuclear programme have focused on its enrichment programme, which has accumulated enough material for several bombs, in the view of nuclear proliferation experts.
Analysts say the fuel rod development does not bring Iran any closer to producing nuclear weapons, but could be a way of telling its enemies that time is running out for a negotiated solution to the dispute.
Iran appears to have overcome one serious recent obstacle to nuclear development by succeeding in neutralizing and purging the Stuxnet computer virus from its nuclear machinery, European and U.S. officials and private experts told Reuters. Many believe Israeli operators planted the virus.
(Additional reporting by Mitra Amiri, Ramin Mostafavi in Tehran, Fredrik Dahl in Vienna, Steve Gutterman in Moscow, John Irish in Paris, Dmitry Zhdannikov and Adrian Croft in London; Editing by Tim Pearce)