Iran warned on Saturday the West has until the end of the month to accept Tehran’s counter-proposal to a U.N.-drafted plan on a nuclear exchange, or the country will start producing nuclear fuel on its own.

The warning was a show of defiance and a hardening in Iran’s stance over its controversial nuclear programme, which the West fears masks an effort to make nuclear weapons. Tehran insists the programme is only for peaceful, electricity production purposes and says it has no intention of making a bomb.

“We have given them an ultimatum. There is one month left and that is by the end of January,” Foreign Minister Manouchehr Mottaki said, speaking on state television.

However, even if Tehran started working on the fuel production immediately, it would likely take years before it can master the technology to turn uranium, enriched to the level of 20 percent, into rods that make the fuel.

Iran dismissed an en-of-2009 deadline imposed by the Obama administration and the West to accept a U.N.-drafted deal to swap most of its enriched uranium for nuclear fuel. The deal would have reduced Iran’s stockpile of low enriched uranium, limiting -- at least for the moment -- its capabilities to make nuclear weapons.

The U.S. and its allies have demanded Iran accept the terms of the U.N.-brokered plan without changes.

Instead, Tehran came up with a counterproposal: to have the West either sell nuclear fuel to Iran, or swap its nuclear fuel for Iran’s enriched uranium in smaller batches instead of at once as the U.N. plan calls for.

This is unacceptable to the West because it would leave Tehran with enough enriched material to make nuclear arms.

The U.N. deal has been the centrepiece of the West’s diplomatic effort toward Iran.

Under the plan, drafted in November, Iran would export most of its stockpile of low-enriched uranium for further enrichment in Russia and France, where it would be converted into fuel rods. The rods, which Iran needs for a research reactor in Tehran, would be returned to the country about a year later.

Exporting the uranium would temporarily leave Iran without enough stockpiles to further enrich the uranium into the material for a nuclear warhead, and the rods that are returned could not be used to make weapons.

“They (the West) must decide on supplying fuel for the Tehran reactor on one of the two offers, purchase or swap,” Mottaki said. “Otherwise, the Islamic Republic of Iran will produce the 20 percent enriched fuel with its own capable experts.”

Enrichment is at the core of the nuclear controversy. Iran currently has one operating enrichment facility that churns out 3.5 percent enriched uranium. The country needs fuel enriched to 20 percent to power a Tehran medical research reactor. For nuclear weapons, uranium needs to be enriched to 90 percent or more.

The U.N. has demanded Iran suspend all enrichment, a demand Tehran refuses, saying it has a right to develop the technology under the Non-Proliferation Treaty.

Iran has also defiantly announced it intends to build 10 new uranium enrichment sites, drawing a forceful rebuke from the U.N. nuclear watchdog agency and warnings of the possibility of new U.N. sanctions.

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