Under the agreement, which would cap an $800-million contract to build and bring the Bushehr plant on line, Russia will fuel the reactor on condition that Iran sends back spent fuel, which could be upgraded to weapons use.

Iranian media said Russia's top atomic energy official Alexander Rumyantsev and his Iranian counterpart Gholamreza Aghazadeh inked the deal during a tour of the Russian-built power plant at Bushehr in southern Iran. Washington, convinced that Iran is seeking to build atomic weapons, has been trying to convince Moscow to halt its nuclear cooperation with Iran.

The condition that spent fuel be returned was built into the deal as a concession to Western concerns over Iran's ambitions. Tehran initially rejected the condition, but eventually relented after two years of negotiations.

The dispute over the fate of spent fuel had pushed the plant's opening back to January 2006. The deal faced a further snag Saturday when Iran objected to a Russian proposal to further delay firing up the plant's reactor. According to Russia's ITAR-TASS news agency, the plant is now scheduled to go online at the end of 2006.

"We foresee physical startup at the end of 2006, with the fuel to be delivered around half a year before that," Rumyantsev was quoted as saying. "We signed a confidential protocol setting out the schedule for delivery of fuel."

The quantity of fuel involved was around 100 tons, Rumyantsev said. Aghazadeh told state television that the power station was likely to be fully equipped within 10 months, with tests taking place by mid-2006.

No immediate delivery

A Russian foreign ministry spokesman said the agreement signed Sunday between for the return of spent nuclear fuel from a civilian plant did not mean that deliveries of the fuel to Iran will begin immediately. Spokesman Alexander Yakovenko was quoted as saying by Interfax news agency as saying the nuclear fuel would be delivered from Russia to Iran only when construction of the station at Bushehr had reached the stage where it was ready for insertion of the fuel.

"Russia's signature with Iran of the agreement on return of spent nuclear fuel does not mean that delivery of Russian nuclear fuel to this country is to start immediately," Alexander Yakovenko was quoted as saying by Interfax news agency.

Although US President George W. Bush and Russian President Vladimir Putin agreed at a summit Thursday that Iran should not develop nuclear weapons, Moscow has stuck by the lucrative contract. Germany kicked off work on the plant in the 1970s, but activity froze during the 1979 Islamic revolution and the 1980-88 Iran-Iraq war.

According to Russian diplomats, the United States has been lobbying against Moscow's involvement in Iran's nuclear program "on a daily basis". They say the huge contract has helped save Russia's atomic energy industry, and emphasize there is no way that Bushehr -- also under International Atomic Energy Agency (IAEA) scrutiny -- could constitute part of a weapons program.

Russia is also examining the option of building a second reactor at Bushehr along with plants at other locations. But the United States argues Iran -- lumped into an "axis of evil" -- has no need for nuclear energy because of its massive oil and gas supplies. It wants to see Iran hauled before the UN Security Council for possible sanctions.

Tehran denies it wants bomb

Tehran counters that it needs to free up fossil fuels for export and meet increased energy demands from a burgeoning population. It also flatly denies allegations that it is seeking an atomic bomb. Iran also intends to produce its own nuclear fuel for future plants -- hoped to produce 7,000 megawatts of electricity by 2020 -- a drive at the center of the current stand-off with the international community.

Britain, France and Germany have been trying to persuade Tehran to permanently stop enriching uranium -- which can be directed to both civil and military uses -- in return for a package of incentives. But enrichment for peaceful purposes is permitted under the nuclear Non-Proliferation Treaty (NPT), and Iran insists it only wants to enrich uranium to levels required for civil purposes.

The fiercely isolationist clerical regime also argues that it does not want to be dependent on foreign fuel -- a position likely to be reinforced by the difficulties encountered in negotiating Russian supplies.

"During this trip we made it quite clear that enrichment is not negotiable," nuclear negotiator and top cleric Hassan Rowhani told state media on Sunday upon his return to Tehran from a visit to Paris and Berlin.

A two-year probe by the IAEA, the UN body that monitors the NPT, has uncovered plenty of suspect activity by Iran, but no conclusive "smoking gun" to prove that the country has military plans for its program.