VIENNA/WASHINGTON - Iran has notified the U.N. nuclear watchdog it rejects key parts of a draft deal to send abroad most of its enriched uranium, designed to ease fears the material could be used to make nuclear weapons, diplomats said on Tuesday.

It was Iran's first apparently formal answer to the proposal hatched in October and echoed months of dismissive or ambiguous remarks made through the media. The United States rejected Tehran's reply as inadequate.

U.S. intelligence agencies were finalizing a new assessment of Tehran's nuclear program that sees Iran pushing forward with nuclear weapons research but not yet relaunching its bomb program in full, U.S. officials said.

Diplomats said Iran's position on enriching uranium abroad was reflected in a memo in the hands of the International Atomic Energy Agency. It repeated verbal calls for amendments that Western powers had dismissed as non-starters but said did not amount to a final response.

Under the deal, Iran would transfer 70 percent of its stock of low-enriched uranium (LEU) abroad and in return receive fuel for a medical research reactor.

The deal aimed to reduce Iran's LEU reserve below the quantity needed for the fissile core of a nuclear weapon, if it were enriched to a high degree of purity.

I am not sure that they have delivered a formal response but it is clearly an inadequate response, U.S. State Department spokesman P.J. Crowley told reporters.

I am not sure that whatever they have done, perhaps today, is any different than what they have done previously.

Iran's failure to meet an effective U.S. deadline of December 31 to accept the October plan devised by then-IAEA chief Mohamed ElBaradei has prompted six world powers to start considering possible tougher sanctions against Tehran.

Washington and its Western allies accuse Iran of trying to develop nuclear weapons under the cover of its civilian atomic program. Iran says its program is designed to generate electricity so it can export more of its valuable oil and gas.

A Vienna-based diplomat said Iran's position was conveyed earlier this month to the United States, France and Russia, the other parties to the draft deal.

DEFIANCE OF U.N. RESOLUTIONS

This written position is a non-event because it's nothing new, it just makes official what the Iranians have been saying (through the media), said a Western diplomat, who like others asked for anonymity due to political sensitivities.

U.S. intelligence analysts have been finalizing a revised national intelligence estimate (NIE) that was expected to bring the United States more into line with its European allies about the state of Iran's nuclear program, officials said on Tuesday, speaking on condition of anonymity.

The key assertions of the 2007 U.S. report -- that Iran halted its nuclear weapon design and weaponization work, as well as its covert uranium conversion and uranium enrichment related-activities in 2003 -- have long been disputed by some European spy agencies.

U.S. officials have signaled at least some of those assertions will require revision in the new NIE, which could be completed in weeks and may bolster the U.S. argument for new U.N. sanctions on Iran.

But they stressed that the differences would be nuanced.

Basically, we're talking about research (resuming) -- not about the Iranians barreling full steam ahead on a bomb program, a U.S. official said on condition of anonymity.

Officials at the U.N. nuclear watchdog agency in Vienna had no immediate comment. Iran's IAEA envoy could not be reached.

The fuel plan was meant to allay suspicions Iran secretly intends to develop atomic bombs from enrichment by having Iran ship out much of its LEU inventory for further refinement and conversion into fuel rods to keep the medical reactor running.

Western diplomats said Tehran accepted such a deal, in which it would get reactor fuel back around a year after parting with LEU, in principle at Geneva talks with six powers in October.

But Tehran later said it could only agree to simultaneous swaps of LEU -- which is refined to the 5 percent level and is suitable for fueling nuclear power plants -- for reactor fuel in small, staggered amounts on its own soil.

This would mean no reduction of its LEU reserve to below the quantity needed for conversion into fissile material if it were to be enriched to a high state of purity.

Iranian officials subsequently warned the Islamic Republic was prepared to enrich LEU to higher levels for the medical reactor fuel itself if the powers did not accept its terms.

Iran continues to enrich uranium, in defiance of U.N. resolutions that have imposed modest sanctions since 2006, at its Natanz centrifuge complex, albeit at a slowed pace dogged by technical glitches, diplomats and security sources say.

(Additional reporting by Arshad Mohammed in Washington; Editing by John O'Callaghan)

Russia