MUNICH (Reuters) -- Iran sees good prospects for clinching a deal with world powers on exchanging some of its low-enriched uranium (LEU) for higher-grade fuel it can use in a reactor producing medical isotopes, Foreign Minister Manuchehr Mottaki has said.
Such a deal could represent a major breakthrough in the long-running dispute over Iran's nuclear program, but it was not clear whether Iran's conditions would be acceptable to the United States and others.
"I personally believe we have created conducive ground for such an exchange in the not very distant future," Mottaki told the annual Munich Security Conference.
But he said it should be up to Tehran to set the amounts to be exchanged, based on its needs.
The uranium swap deal was first discussed last year between Iran and six world powers, which saw it as a way to ensure Tehran did not further enrich its uranium to a level that would be potentially usable in a nuclear bomb.
But Tehran, which denies any bomb-making intentions, had failed to respond positively to the proposal from the group -- the United States, Russia, China, Britain, France and Germany -- until this week.
Mottaki said he would discuss the exchange with the new head of the International Atomic Energy Agency, Yukiya Amano, on the fringes of the Munich conference.
"We think all parties have shown their political will to fulfill this exchange," he said, without naming specific countries.
Iran would hand over uranium enriched to 3.5 percent, and receive 20 percent enriched uranium in return, to use in the Tehran reactor producing the medical isotopes, he said.
"Here there must be a guarantee for both sides that this 3.5 percent will be given for sure and 20 percent will be given back for sure," he said.
Mottaki said the three 'components' for a deal were timing, place and quantity.
But Iran wants to hand over its fuel in two batches and says the handover should be conducted on Iranian soil, The Times newspaper said on Saturday citing a copy of Tehran's written proposals given to British parliamentarians.
Both these conditions were part of several previous Iranian initiatives that were rejected by the West, it said.
Mottaki said Iran acknowledged it could take a number of months for its negotiating partners to produce the 20 percent fuel required for the Tehran reactor. "We can understand this period for production," he said.
Once it was ready, it would be exchanged "simultaneously" with the Iranian LEU. He did not make clear where this should happen.
In a further condition that could pose a stumbling block, he stressed it should be for Iran to determine the quantities involved.
"Our request is the quantity should be announced by the party who is going to use this enriched uranium, and the quantity will be announced based on our need, this is the most important point," he said.
In a cautious initial reaction, Swedish Foreign Minister Carl Bildt, sharing a platform with Mottaki, urged Iran to formalize its proposals with the IAEA, the United Nations' nuclear watchdog.
"Schedule a meeting as soon as possible according to what was agreed (with the six powers) on October 1," Bildt said.