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The US has dismissed an Iranian offer to exchange nuclear fuel, saying it was inconsistent with a deal that would allow Iran to avoid further sanctions.

"Iran's proposal does not appear to be consistent with the fair and balanced draft agreement proposed by the International Atomic Energy Agency [IAEA], the UN nuclear watchdog, a US official said on Saturday.

Manouchehr Mottaki, Iran's foreign minister, proposed that the country swap 880 pounds (400 kilogrammes) of low-enriched uranium for nuclear fuel in an exchange on Iran's island of Kish, in the Persian Gulf, as the first phase of a deal with world powers.

However, according to the deal, in consultation with the US, Russia and France, the nuclear material was to be exchanged all at once as the IAEA believes that carrying it out in slow stages would leave Iran in control of enough uranium to make a bomb.

The IAEA had also previously ruled out a swap taking place inside Iran.

The US official, who declined to be named, said Iran's offer contained "nothing new" and urged the country to take up the existing IAEA proposal, which calls on Iran to send 2,645 pounds (1,200 kilogrammes) of its low enriched uranium to Russia "in one batch."

Under the plan Iran's uranium would be enriched to higher levels in Russia, turned into fuel rods in France and returned to power a research reactor in Tehran that produces medical isotopes.