Iran declared Tuesday it has started the process of producing 20 percent enriched uranium, defying world powers who have warned of new sanctions unless the Islamic republic halts its sensitive nuclear drive.

"From today we have started the 20 percent enrichment in a separate cascade in Natanz," Iran's atomic chief Ali Akbar Salehi told the official IRNA news agency.

Several Iranian media networks reported the process was being carried out under the supervision of inspectors from the International Atomic Energy Agency (IAEA) but there was no immediate confirmation from the UN nuclear watchdog.

Salehi said the separate cascade was "more on a lab scale", adding it had 164 centrifuges -- the devices which rotate at supersonic speed to enrich uranium.

"This can make between three to five kilograms (6.5 to 11 pounds) of 20 percent enriched uranium per month for the Tehran reactor," he said, referring to Iran's internationally-supervised facility which produces medical isotopes.

Salehi said the production is "twice" the needs of the reactor.

The Islamic republic has been conducting low level enrichment of uranium in the central city of Natanz for several years, in defiance of three sets of UN sanctions.

Iran's launch of the stepped-up enrichment process comes as the United States and France warned they will push for "strong" new UN sanctions against Tehran over its nuclear drive.

Western powers 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 insists its intentions are entirely peaceful and that it specifically wants to process uranium to the 20 percent level to fuel its Tehran research reactor.

The West is trying to convince Iran to sign on to an IAEA-brokered deal that 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 as world powers are demanding.

Foreign ministry spokesman Ramin Mehmanparast on Tuesday left the door open for a deal, saying the stepped-up enrichment programme did not preclude a swap deal going ahead.

"If other countries or the IAEA meet our needs, maybe we can change our approach... the door is not closed yet. Anytime they (world powers) are ready, this (fuel deal) can be done," he told reporters.

On Monday, a French presidency official said that President Nicolas Sarkozy and US Defence Secretary Robert Gates had in talks in Paris "agreed that the time has come for the adoption of strong sanctions (against Iran), in the hope that dialogue will be resumed."

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."

Mehmanparast on Tuesday said it was "wrong" of the two powers to seek a new UN resolution.

"These measures will not help to get out of the deadlock. They are mistaken if they think our people will back down even one step as a result of these measures."

China on Tuesday repeated a call for further dialogue with Iran.

"I hope relevant parties will step up efforts to push forward dialogue on this question," foreign ministry spokesman Ma Zhaoxu said in Beijing.

Western powers, meanwhile, have cast doubt on Iran's claims it can enrich uranium to that level while some experts say Tehran would need some time to master the process of building the actual fuel rods for the reactor and would probably use knowledge gained from abroad to do so.

Other experts, however, say that the process of enrichment is esssentially the same, no matter what level of refinement is required and point out that Iran's plant in Natanz is already churning out LEU.

"The technology for enriching uranium is basically the same whether you are enriching it at 3.5 percent for use in power reactors, or 20 percent for use in the Tehran research reactor, or 93 percent for use in nuclear weapons," said Mark Fitzpatrick of the International Institute for Strategic Studies in London.