Iran has decided to turn down proposals from the major powers for the supply of nuclear fuel, a leading member of parliament said on Saturday, in a serious setback for UN-brokered efforts to allay Western concerns about its ambitions.

Under the plan thrashed out in talks with France, Russia and the United States, Iran was to have shipped out most of its stocks of low-enriched uranium in return for fuel for a research reactor in Tehran.

The proposals were designed to assuage fears that Iran could otherwise divert some of the stocks and enrich them further to the much higher levels of purity required to make an atomic bomb.

But officials, who strongly deny any such intention, had expressed mounting concern that Iran's arch-foe Washington might welch on the deal and Tehran might ship out its uranium without receiving anything in return.

"We do not want to give part of our 1,200 kilos (more than 2,640 pounds) of enriched uranium in order to receive fuel of 20 percent enrichment," said Alaeddin Borujerdi, the influential head of parliament's national security and foreign policy committee.

"This option of giving our enriched uranium gradually or in one go is over now," he told the ISNA news agency.

"We are studying how to procure fuel and (Ali Asghar) Soltanieh is negotiating to find a solution," he added, referring to Iran's envoy to the UN nuclear watchdog.

A spokesman for the International Atomic Energy Agency on Saturday said the agency was "still waiting for the formal response" from Soltanieh.

In its initial reply to the plan on October 29, Tehran had taken issue with provisions for it to ship out 75 percent of its stocks before receiving any fuel, Iranian media reported.

Only on Friday, Foreign Minister Manouchehr Mottaki had suggested that Tehran was ready to go back to the IAEA with new proposals in the hope of further negotiations to address the worries of those within the regime who feared Iran was conceding a lot without receiving much in return.

But even he underlined that Iran was considering other options -- either further enriching its own uranium for the Tehran reactor or trying to seal a deal with a foreign government to import the necessary fuel commercially, rather than in exchange for its low-enriched stocks.

And in a sermon at the main weekly prayers in Tehran on Friday, hardline cleric Ahmad Khatami gave vent to the misgivings of many in the regime.

"What guarantee do we have that if we deliver our enriched uranium, we will get the fuel?" he asked. "If they want to harm our rights, our response will be to enrich the fuel ourselves."

In an interview with the New York Times on Thursday, the UN watchdog's director Mohamed ElBaradei spoke of the difficulties of brokering a deal amid the legacy of suspicion between Tehran and Washington, which have had no diplomatic relations since the aftermath of the 1979 Islamic revolution.

"There's total distrust on the part of Iran," ElBaradei said.

But the IAEA chief also made plain that Iranian demands for its low-enriched uranium to be shipped out at the same time as it received the nuclear fuel were not acceptable to Western powers.

A simultaneous exchange "would not defuse the crisis, and the whole idea is to defuse the crisis," he said.

Speaking at the Council on Foreign Relations think-tank in New York the previous day, ElBaradei had underlined the stakes in resolving a standoff in which both the United States and its ally Israel have refused to rule out military action to prevent Iran acquiring a nuclear capability.

"I think it's very clear if we succeed on that, it would open the way, finally, to a new era, when Iran and the US... can work together," he said.

But if Israel were to bomb Iran's nuclear facilities, it would "turn the Middle East into a ball of fire," he warned.

US Secretary of State Hillary Clinton had herself spoken of the importance of a deal on Thursday. "This is a pivotal moment for Iran, and we urge Iran to accept the agreement as proposed," she said.