By Louis Charbonneau
NEW YORK (Reuters) - Iranian President Mahmoud Ahmadinejad on Thursday said Tehran would stop producing 20 percent enriched uranium if it is guaranteed fuel for a medical research reactor, seeking to revive a fuel swap deal that fell apart in 2009.
"Any time they can guarantee us this sale ... we will stop 20 percent enrichment," Ahmadinejad told a small group of reporters in New York, where he is attending a meeting of the U.N. General Assembly.
"Whenever these assurances are given, we will do our part," Ahmadinejad said. "We will cease domestic enrichment at the 20 percent level. That's all. But we will continue the building of new power plants."
Tehran's refusal to halt enrichment has provoked four rounds of U.N. sanctions on the world's No. 5 oil exporting state and tighter U.S. and European Union restrictions.
Ahmadinejad touched on the issue of the sanctions, acknowledging they had hit the Iranian economy but denying they had had a devastating impact.
"At the end of the day, sanctions do have an effect, we never maintained that they had no effect whatsoever," he said. "But they do not have a decisive effect."
Western nations suspect Iran is trying to use its nuclear program to develop atomic weapons. The Islamic Republic has denied the charge, saying it wants to produce nuclear energy.
Tehran plans to build 19 new 1,000-megawatt nuclear power plants to meet growing electricity demand.
Iran recently began shifting enrichment centrifuges to an underground bunker near the holy city of Qom as part of a push to triple output capacity of higher-grade enriched uranium, a development Washington called "troubling."
Western analysts say that Iran's drive to produce 20 percent enriched material puts it closer to the 90 percent threshold suitable for atom bombs.
Iran says it needs the material to fuel a Tehran research reactor it says helps in treating hundreds of thousands of cancer patients.
A tentative pact brokered by the International Atomic Energy Agency, the U.N. nuclear watchdog, in 2009 to exchange Iranian low-enriched uranium (LEU) for higher-refined fuel from abroad collapsed after Iran backed away from its terms.
The fuel swap plan was envisioned by the West as a way to reduce mistrust and help pave the way for broader talks on Tehran's nuclear program but subsequent discussions have revealed major differences standing in the way of reviving any such deal.
Western diplomats have made clear they want Iran to send out most of its low-enriched uranium -- potential weapons material if refined further -- as part of any fuel swap.
Iran has made equally clear it is not prepared to part with more LEU than it agreed to under the original plan even though its stockpile has more than doubled in the intervening period.
Analysts and diplomats believe the original deal fell victim to Iran's internal power rivalries as Ahmadinejad's rivals -- who have only grown stronger since the deal was first outlined -- raised new conditions which proved unacceptable for the West.
(Writing by Andrew Quinn; editing by Anthony Boadle)