The U.N. nuclear watchdog fears Iran's plan to start producing higher-enriched uranium will damage chances to save a proposed atomic fuel supply deal between Tehran and world powers, its spokeswoman said on Monday.

She confirmed Iran had notified the International Atomic Energy Agency of its intention to begin refining uranium to a higher level on Tuesday -- a move that will heighten Western suspicions of an Iranian quest to develop atomic bombs.

"IAEA Director-General Yukiya Amano noted with concern this decision, as it may affect, in particular, ongoing international efforts to ensure the availability of nuclear fuel for the Tehran Research Reactor (via the IAEA-brokered draft deal)," spokeswoman Gill Tudor said in a statement.

"(Amano) reiterated the agency's readiness to play an intermediary role on the issue of the Tehran Research Reactor."

Reuters