"Based on the existing standards, the pellets useable in the 40-megawatt Arak research reactor have been produced," said the head of Iran's atomic energy organisation, Gholam Reza Aghazadeh.

"By the first half of the next Iranian year (September 2008), the fuel manufacturing plant will be able to provide fuel for the 40-megawatt Arak research reactor," he said.

The Arak reactor, due to be completed in 2009, would replace a research reactor in Tehran that was supplied by the Americans before the 1979 Islamic revolution.

"Tubes for the 40-megawatt Arak research reactor will be produced in the zirconium production plant," Aghazadeh added.

The plant, located in the central city of Isfahan, produces zirconium tubes that will encase the fuel rods for Iran's nuclear reactors.

Iran, which aims to master the complete fuel cycle, has its own uranium mines and is processing the uranium for its nuclear facilities as fuel.

The issue of uranium enrichment forms the crux of Iran's current standoff with the West, which suspects the Islamic republic is pursuing and even expanding the process in a covert drive to build a bomb.

Iran insists it is merely seeking technology to generate electricity for a growing population.