Iran, Brazil and Turkey signed an agreement on Monday over a nuclear fuel swap designed to allay international concern over the Islamic Republic's atomic ambitions and avert fresh sanctions on Tehran.

Iran said it had agreed to swap 1,200 kg of its low-enriched uranium for higher-enriched nuclear fuel, to be used in a medical research reactor. The exchange would take place in Turkey, Foreign Ministry spokesman Ramin Mehmanparast said.

Iran, which rejects Western accusations it is seeking to develop nuclear bombs, had earlier insisted such a swap must take place on its territory.

Iranian President Mahmoud Ahmadinejad called on six world powers, which have been discussing further UN sanctions on the major oil producer, for fresh talks on Iran's nuclear program after the fuel exchange agreement.

"Following the signing of the nuclear fuel swap deal, it is time for 5+1 countries to enter talks with Iran based on honesty, justice and mutual respect," Ahmadinejad said, referring to the five permanent UN Security Council members and Germany.

There was no immediate comment from Washington, which has been leading a Western push to impose additional punitive measures on Tehran.

Turkey and Brazil, both non-permanent members of the UN Security Council, had offered to mediate to find a resolution to the impasse. It was seen as the last chance to avoid a fourth round of UN sanctions.

Brazilian President Luiz Inacio Lula da Silva and Turkish Prime Minister Tayyip Erdogan discussed the deal with Ahmadinejad in Tehran, Iranian state media reported.

"The swap will take place in Turkey," Mehmanparast told reporters, shortly before the agreement was signed by ministers in front of reporters.

Mehmanparast said Iran would send low-enriched uranium to Turkey within a month and that it would be under the supervision of the UN nuclear agency, state Press TV reported.

Major world powers had urged Iran to accept a months-old International Atomic Energy Agency plan to ship 1,200 kg (2,646 lb) of its low-enriched uranium - enough for a single bomb if purified to a high enough level - abroad for transformation into fuel for a medical research reactor.

The proposal, backed by the United States, Russia and France, was aimed at giving time for diplomatic talks with Iran.

Tehran agreed in principle to the deal in October but then demanded changes such as a simultaneous swap on Iranian soil, conditions other parties in the deal said were unacceptable.

Iranian Foreign Minister Manouchehr Mottaki said Turkey would be obliged to return Iran's LEU "immediately and unconditionally" if Monday's agreement between Iran, Brazil and Turkey was not implemented.

"Based on the agreement signed this morning, if the swap does not take place, then Turkey will be obliged to send back our dispatched uranium immediately and unconditionally," Mottaki said.

Trita Parsi, director of Washington-based National Iranian American Council, said a potential breakthrough had been made in the long-running dispute, saying Turkey and Brazil had succeeded in filling a "trust gap".

"But will the deal be satisfactory to the U.S.? With the details remaining unknown, it's impossible to speculate," Parsi said in an e-mail comment.