Iran will start producing 20% enriched nuclear fuel from Tuesday, the head of its Atomic Energy Organization was quoted as saying.
"We will hand over an official letter to the IAEA (International Atomic Energy Agency) tomorrow, informing the agency that we will start making 20% enriched fuel from Tuesday," Ali Akbar Salehi told Iran's Arabic-language state television channel, al Alam.
"I (ask) Dr. Salehi to start work on the production of 20% fuel using centrifuges," Ahmadinejad said in a televised speech.
"We are interested in cooperation with the West, but if they want to keep playing games with the Iranian nation, then we must be prepared and enrich uranium at 20% ourselves," the president said.
But he added, "The doors for interaction are still open." Ahmadinejad also said Iran had the capability to enrich uranium using laser technology, without elaborating.
Iran's announcement raised the stakes in its dispute with the West, but Ahmadinejad said talks were still possible on a nuclear swap offer by world powers designed to allay fears the Islamic Republic is making an atomic bomb.
US Defense Secretary Robert Gates said the response by Iran, a major oil exporter which says its nuclear programme is to make electricity and not bombs, was very disappointing.
"If the international community will stand together and bring pressure to bear on the Iranian government, I believe there is still time for sanctions and pressure to work," he told a news conference during a visit to Italy.