"Iran has the capacity and the potential, but certain people imagined that the fuel was already ready," Kamal Kharazi was quoted as saying by the official news agency IRNA.

Kharazi said he had also been reacting to a recent call from US President George W. Bush that only a limited number of countries should be permitted to trade in nuclear materials.

"As a country that is capable of producing nuclear fuel, the Islamic Republic of Iran is ready to sell it on the international market," Kharazi had said on Saturday.

The foreign minister also confirmed Tuesday that Iran is studying the development of a new centrifuge.

"Some people are trying to make a big issue about this," he said. "This is only a research programme."

Diplomats at the IAEA's headquarters in Vienna said last week that UN nuclear weapons inspectors in Iran had found blueprints for an advanced uranium enrichment centrifuge, the G2, that Tehran had failed to declare even as it was claiming to be providing full disclosure on its atomic energy program.

Enriched uranium is used as fuel for nuclear reactors but can also be used for making atomic bombs.

But the diplomats said the discovery was not a "smoking gun" the IAEA could use to take Iran before the UN Security Council, where it could face sanctions.

Nevertheless, the discovery has raised fresh alarms and has placed the Islamic republic -- accused by the United States of trying to develop nuclear weapons -- under further scrutiny ahead of the publication of a new IAEA report on Iran's controversial bid to generate atomic energy.

The IAEA board had given Iran until last October 31 to reveal all details of its nuclear program.

In addition, Iran had promised Europe's "big three" that it would suspend uranium enrichment, yet appears to be working within a narrow definition of that suspension.

WAR.WIRE