Iran's envoy to the International Atomic Energy Agency, Ali-Asghar Soltanieh, said his country handed over a letter to the agency stating its intention, Press TV reported.

Uranium enriched to 20 percent is considered "highly enriched" uranium, the U.S. National Research Council says on its Web site. That level of enrichment is the threshold for uranium capable of setting off a nuclear reaction.

Iran insists its activities are for civilian purposes only. "The new fuel, to be produced at the Natanz enrichment plant, will supply the Tehran research reactor which produces medical isotopes," the State TV report said.

Ali Akbar Salehi, director of the Atomic Energy Organization of Iran, told Arabic-language Al-Alam television network Sunday night that the enrichment will start Tuesday "in the presence of inspectors and observers from the IAEA," Iranian media reported.

Meanwhile, Salehi said Iran has a final test to run before launching its first nuclear power plant in the southern city of Bushehr, the semi-official Fars News Agency reported Monday. A Russian contractor is involved in the construction of the facility.

"There remains just one test named 'Warm Water Test' before we can launch the power plant," he told Fars.

President Mahmoud Ahmadinejad ordered Salehi on Sunday to boost enrichment of the country's uranium to 20 percent, in the latest challenge to Western powers trying to rein in Tehran's nuclear program.

The move is likely to shake up skeptics as the West tries to press Iran to send its low-enriched uranium abroad, to be processed and then returned for use at the medical research reactor in Tehran.

"The doors for interaction are still open," Ahmadinejad said at a ceremony marking Iran's laser technology achievements. "We had told them (the West) to come and have a swap, although we could produce the 20 percent-enriched fuel ourselves."

The Islamic republic had until the end of 2009 to accept the deal offered by the "P5 plus 1," which consists of permanent U.N. Security Council members Britain, China, France, Russia and the United States, plus Germany. Instead, Iran came back with a counteroffer, giving the West until the end of January to accept its own proposal. The details of that offer were not disclosed.

Last month, Iranian Foreign Minister Manouchehr Mottaki said the country would officially declare that it would produce enriched fuel at 20 percent if the West missed the deadline. Mottaki had said in December that the country was ready to send about 400 kilograms of the 3.5 percent-enriched uranium in Iran's Kish Island and receive 20 percent-enriched fuel -- one-third of the 1,200 kilograms spelled out in the P5 plus 1 deal.

Iran's leadership has signaled concerns about whether the West would return the enriched fuel.

In the speech broadcast Sunday on Iranian state television, Ahmadinejad added that Salehi has been told "the door to the exchange of fuel is open, but they must start the production of 20 percent-enriched fuel."

And on Friday, Mottaki said he thought a solution would be reached to export uranium.

"The amount of uranium is negotiable, but I am confident that a solution can be found," Mottaki said on the sidelines of the Munich Security Conference in Germany, Iran's state-run Press TV reported.

U.S. Defense Secretary Robert Gates said Sunday, "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, but we must all work together." Gates spoke at a news conference in Italy with his Italian counterpart, Ignazio La Russa.

Meanwhile, a spokesman for the Iranian parliament's national security and foreign policy committee said Sunday that the panel thought the Ahmadinejad administration was sending mixed messages about conducting domestic enrichment while still remaining open to fuel exchange. Most of the panel wants to enrich uranium domestically.

"What we must be mindful of when we speak of the exchange [of nuclear fuel] is, the positions must be in line with the frameworks that are acceptable by the system" and Iranian Supreme Leader Ayatollah Ali Khamenei, spokesman Kazem Jalali told Iran's semi-official Mehr News.

"We never saw any sincerity from the 5 plus 1 countries that would make us change our experiences vis-a-vis the exchange of fuel," he said. "It seems that the positions announced by the administration regarding this matter were uncoordinated words."

He said lawmakers had established a two-month deadline for enrichment and "we all supported it."

Sunday's new enriched uranium plans fall within the 10-day period marking the 31st anniversary of the 1979 Islamic revolution that toppled the U.S.-backed shah.