Iran has notified the UN nuclear watchdog of plans to produce higher enriched uranium, the country's envoy to the body said on Monday as world powers consider new sanctions against the Islamic Republic.

Ali Asghar Soltanieh, Tehran's envoy to the International Atomic Energy Agency, told state-owned Al-Alam television from Vienna that an official letter on the start of the 20% uranium enrichment activities to provide the research reactor in Tehran with fuel has been handed over to the IAEA.

Soltanieh also said in comments published by Iran's official IRNA agency that Iran has invited IAEA inspectors to monitor the uranium enrichment activities.

Germany on Monday said the move is a further sign that Iran is not cooperating with the international community and renewed warnings of fresh sanctions.

Iran may face a fourth set of UN Security Council sanctions over its uranium enrichment activities, which Western powers fear are aimed at building nuclear weapons. Tehran insists its nuclear program is designed for power generation.

Salehi's announcement of plans to enrich uranium to 20%, the level required to be used as fuel in reactors, came hours after orders from hardline President Mahmoud Ahmadinejad.

Salehi told IRNA that "we could not wait any longer for the needs of our sick people who require radio isotope medicines." The Tehran reactor for which the fuel is needed makes medical isotopes.

Salehi, however, said that Tehran will stop the enrichment program if a deal on the enrichment of uranium can be agreed with the six world powers negotiating with Iran over its nuclear program.

A UN-brokered plan approved by the United States, Russia, China, Britain, France and Germany envisages Tehran exporting most of its low-enriched uranium to Russia for further enrichment and its conversion into fuel rods for the research reactor in France.

Tehran has missed the deadline for response to the deal, prompting Western powers to demand tougher UN Security Council sanctions.