As European nations presented a restrained proposal for sanctioning Iran over its nuclear program, Iranian President Mahmoud Ahmadinejad on Saturday said that his country has expanded its uranium enrichment program at a plant in central Iran.

"We have started installing 3,000 centrifuges," Ahmadinejad was quoted as saying by the Fars news agency.

"This is the first step toward industrial production. We will be able to produce our nuclear fuel once we install 60,000 centrifuges," he said. Centrifuges spin uranium gas into enriched material to produce nuclear fuel.

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In a fresh bid to win Russian and Chinese support, key European nations circulated a revised UN resolution Friday narrowing sanctions on Iran for refusing to suspend uranium enrichment and urging negotiations to resolve the standoff over its nuclear ambitions.

The new draft still would ban the supply of materials and technology that could contribute to Iran's nuclear and missile programs but it spells out in much greater detail exactly what items are prohibited. The Russians and Chinese had complained that the proposed sanctions in the original draft were too broad.

The new draft keeps a travel ban and asset freeze on companies, individuals and organizations involved in Iran's nuclear and missile programs, despite Russian opposition.

Britain, France and Germany - who have led negotiations for several years trying to rein in Iran's nuclear program - have been at odds with Russia and China for weeks over the scope of sanctions. The United States has generally supported the Europeans, though it initially wanted a tougher text.

Russia proposed major changes to the original European text that would limit sanctions solely to measures that would keep Iran from developing nuclear weapons and ballistic missiles and eliminate any travel ban, asset freeze, or mention of the nuclear facility being built by the Russians at Bushehr, Iran.

The new European draft drops all mention of Bushehr, which is projected to go on line in late 2007 and would be Iran's first atomic power plant, and it refers simply to missiles - not ballistic missiles which Russia objected to. But it keeps a range of sanctions and would still limit technical assistance to Iran by the International Atomic Energy Agency and urge countries to prevent Iranian students from studying nuclear-related disciplines.

Whether the new draft goes far enough to meet Russia's concerns remains to be seen. At a meeting in Paris on Tuesday, political directors from the six countries failed to reach agreement though they reported "substantive progress."

Council diplomats said ambassadors from the six countries are expected to
discuss the new draft early next week, possibly Monday.

Iran maintains its nuclear program is purely peaceful, aimed solely at
producing nuclear energy, but the US and the Europeans believe Tehran's
enrichment activities are ultimately aimed at producing nuclear weapons.

The new European draft emphasizes "the importance of political and diplomatic efforts to find a negotiated solution guaranteeing that Iran's nuclear program is exclusively for peaceful purposes ."It welcomes the commitment of the three European countries, Russia, China and the United States, "to a negotiated solution to this issue," and encourages Iran "to engage" with the proposals put forward by the six countries in June.

The goal, according to the new draft, is "a long-term comprehensive
arrangement which would allow for the development of relations and cooperation with Iran based on mutual respect and the establishment of international confidence in the exclusively peaceful nature of Iran's nuclear program."

The European draft makes clear, however, that Iran must "without further delay suspend proliferation sensitive nuclear activities" - specifically all enrichment and reprocessing including research and development, and
construction of a research reactor moderated by heavy water.

It also increases pressure on Iran to fulfill requirements set by the IAEA board and would expand the powers of the UN nuclear watchdog agency to monitor Iran's nuclear program, which diplomats said Russia views as a
"provocation" to Iran.

US Secretary of State Condoleezza Rice addressed the issue of sanctions on Iran at a news conference Friday in Washington. "I think we're making some progress on the resolution in the Security Council. We're not there yet, but I do think we're making some progress," Rice said.

Iranian President Mahmoud Ahmadinejad vowed Tuesday to continue the nuclear program and issued a new threat to downgrade relations with the EU - which is Iran's largest trading partner - if European negotiators opted for tough sanctions.

Both Russia and China, which have major commercial ties with Iran, have
continued to publicly push for dialogue instead of UN punishment, despite
the collapse in October of a European Union attempt to entice Iran into talks.