TEHRAN, Iran — Iran claimed Wednesday that it has achieved two major advances in its program to master production of nuclear fuel, a defiant move in response to increasingly tough Western sanctions over its controversial nuclear program.

Iranian officials also indicated that they were on the verge of imposing an oil embargo on European countries to retaliate for the sanctions, but denied reports earlier in the day that six nations had already been cut off.

State TV quoted Foreign Ministry official Hasan Tajik as saying that six European diplomats were summoned Wednesday and told that Iran has no problem replacing customers -- an implied warning that Tehran would carry out plans to cut off European Union countries immediately to pre-empt sanctions set to go into effect in July.

Conflicting information about the cut-off has been relayed by Iranian media throughout the day: first the full blockade on six countries, then a report carried by the semiofficial Mehr agency saying that exports were cut to France and the Netherlands with four other European countries receiving ultimatums to sign long-term contracts with Iran.

Iranian officials say an immediate cut-off will hit European nations before they can line up new suppliers, and that Tehran has already found buyers for the 18 per cent share of its oil that goes to Europe.

Iran's tough tone comes as tensions mount dramatically with Israel and the United States over its nuclear program, which the West says is aimed at producing weapons technology. Iran denies the charge, saying its program is intended solely for research and generating electricity.

Israel has increasingly warned of the possibility of a military strike on Iran's nuclear facilities, and has accused Iran of being behind attempted attacks on Israeli diplomats in India, Georgia and elsewhere. Iran denies any role in the attacks, which have resembled recent bombing-assassinations of Iranian nuclear scientists that Tehran has blamed on Israel.

Iran is meanwhile pushing ahead on what it says is a drive toward nuclear-self-sufficiency.

On Wednesday, President Mahmoud Ahmadinejad oversaw the insertion of the first Iranian domestically made fuel rod into a research reactor in northern Tehran, the country's official IRNA news agency reported.

"I hope we reach the point where we will be able to meet all our nuclear needs inside the country so we won't need to reach out to others, specifically to the world's dastardly people," Ahmadinejad said.

In a gesture underlining the tone of defiance, state TV showed the teenage son of slain nuclear scientist Majid Shahriari removing the curtain from the fuel container and cutting the ribbon.

Separately, the semiofficial Fars agency reported that a "new generation of Iranian centrifuges" had started operation at the country's main uranium enrichment facility at Natanz in central Iran.

State TV showed the father of Mostafa Ahmadi Roshan, killed in January, clicking on the computer to inaugurate the advanced centrifuges, as the scientist's mother and widow stood by with tears in their eyes.

The moves were aimed at showing that Iran is mastering the entire cycle of producing nuclear fuel on its own despite the restrictions of sanctions that have hampered its ability to procure materials from abroad.

The possibility that Iran was expanding its enrichment capacity was a greater concern from the standpoint of nuclear weapons development than the production of fuel rods.

Shannon Kile, a nuclear weapons research at the Stockholm International Peace Research Institute, said that while from a technical perspective the announcements may be "less than meets the eye," they were likely to be well received by the Iranian public.

"Iran's peaceful nuclear energy program is very popular, it has a lot of support across the political spectrum," he said.

In the fuel cycle, mined uranium is processed into gas, then that gas is spun in centrifuges to purify it. Low-enriched uranium -- at around 3.5 per cent -- is used to produce fuel rods that power a reactor; however, the same process can be used to produce highly enriched uranium -- at around 90 per cent purity -- that can be used to build a warhead.

The Tehran facility where IRNA said the new fuel rods were installed is a research reactor intended to produce medical isotopes used in the treatment of cancer patients. It requires fuel enriched to around 20 per cent, considered a threshold between low and high enriched uranium.

Iran has been producing uranium enriched up to 5 per cent for years, and began enriching up to near 20 per cent in February 2010 after attempts at a deal with the West to import fuel broke down. In January, Iran said it had produced its first such rod.

IRNA said the nuclear fuel rods were produced at a plant in Isfahan, central Iran, and transferred to Tehran under International Atomic Energy Agency supervision. The IAEA had no comment.

A diplomat accredited to the IAEA, which monitors Iran's known nuclear programs, said its inspectors had seen the rods recently and -- while they showed some flaws -- they were crafted well enough to work inside the reactor.

He spoke on condition of anonymity because his information is privileged.

Iranian officials have long spoken of introducing faster, more efficient centrifuges at the Natanz facility. The Fars news agency report did not give details on the advanced models that were installed.

The diplomat said the "new generation" of centrifuges appeared to be referring to about 65 IR-4 machines recently set up at an experimental site at Natanz. The new model can churn out enriched material at a faster rate than the more rudimentary IR-1 centrifuges, thousands of which are at work in Natanz producing low-enriched uranium, said the diplomat.

Iran has been slow to expand use of advanced models, apparently because strict international embargoes make procurement of parts and materials difficult. The 65 new machines are not nearly enough to set up an effective operation, the diplomat said.

Still, the fact that Iran continues to build the newer machines, even at a slow pace, or produce materials it needs domestically, shows that it is able to circumvent sanctions.

Iran's unchecked pursuit of the nuclear program scuttled negotiations over its nuclear program a year ago, but Iranian officials last month proposed a return to the talks with the five permanent U.N. Security Council members plus Germany.

IRNA on Wednesday reported that Iran's top nuclear negotiator Saeed Jalili had written to the European Union's foreign policy chief Catherine Ashton, to formally announce its readiness to restart those negotiations.

In the past, Iran has angered Western officials by appearing to buy time through opening talks and weighing proposals even while pressing ahead with the nuclear program.

EU spokeswoman Maja Kocijancic said that the bloc was looking into the letter together with the United States, Russia and China before taking an official stand.