Defying a key demand set by 35 nations, Iran announced Tuesday it has started converting raw uranium into the gas needed for enrichment, a process that can be used to make nuclear weapons.

Iran's president, Mohammad Khatami (search), vowed his country will press ahead with its nuclear program — which he insisted is peaceful — even if it means a rupture with the U.N. watchdog agency and an end to inspections of Iran's nuclear facilities.

"We've made our choice: Yes to peaceful nuclear technology, no to atomic weapons," President Mohammad Khatami said at a military parade in Tehran. "We will continue along our path even if it leads to an end to international supervision."

In Vienna, Iranian Vice President Reza Aghazadeh said tests are "going on successfully" to make uranium hexafluoride gas (search), the material that, in the next stage, is fed into centrifuges for enrichment.

Of the more than 40 tons of raw uranium being mined for conversion, "Some ... has been used," he told reporters.

His comments, outside the general conference of the 137-nation International Atomic Energy Agency (search), were the latest sign that Iran was ignoring demands made on the weekend by the agency's board of governors to suspend all enrichment and related activities and banish international fears the technology could be used to make weapons.

Iran, which insists it needs enrichment to generate power, announced months ago that it had planned to "test" conversion techniques.

Even before Tuesday's announcement, the large scale of the project — involving more than 40 tons of raw uranium — had heightened concerns that Iran is preparing for full uranium conversion at its Isfahan facility that goes beyond laboratory testing.

Khatami said Iran won't seek nuclear weapons, regardless of IAEA supervision.

"I declare to the world that whether we are under supervision or not, we won't go for nuclear weapons at all," he said at a ceremony marking the anniversary of Iran's 1980-88 war with Iraq. The parade included an example of Iran's ballistic missile, the Shahab-3 (search), which has the capacity to carry nuclear warheads.

"We won't go for nuclear weapons not because we fear others, but because of our beliefs and principles, because we oppose nuclear weapons and consider them a threat to humanity," he said.

A resolution passed unanimously Saturday by the agency's governing board demanded for the first time that Iran freeze all work on uranium enrichment and expressed alarm at Iranian planned conversion of the raw uranium.

Suggesting that Iran may have to answer to the U.N. Security Council if it defied the demands, the resolution said the next board meeting in November would "decide whether or not further steps are appropriate" in ensuring Iran complies.

The resolution specifically expressed alarm at Iranian plans to convert the more than 40 tons of raw uranium into uranium hexafluoride.

In his comment Tuesday, Aghazadeh did not detail the stage the conversion had reached, nor the amounts involved.

But a diplomat familiar with Iran's conversion activities, who spoke on condition of anonymity, told The Associated Press, however, that Iran apparently began in late August and had stopped at a precursor of uranium hexafluoride — apparently waiting for a decision from the leadership to finish the process.

Iran's present suspension of enrichment falls short of international demands.

It says it is honoring a pledge not to put uranium hexafluoride gas into centrifuges, spin it and make enriched uranium. But the resolution calls for a stop as well to related activities, including a halt to making, assembling and testing centrifuges, and to producing the uranium hexafluoride.

Iran is not prohibited from enrichment under its obligations to the Nuclear Nonproliferation Treaty (search). It has for months faced international pressure to suspend such activities as a good-faith gesture, but the resolution went further by actually demanding a stop to enrichment and related activities.

While demanding Iran suspend all uranium enrichment activities, the resolution also recognized nations' right to the peaceful use of nuclear energy — leaving some wiggle room for the Islamic Republic.

Aghazadeh repeated Iran's view that — because its suspension is voluntary and not governed by agreements with the IAEA — his country was free to enrich no matter what the board demanded.

"We believe that what was decided by the board of governors is unjust," he said.

He suggested Iran's course of action remained open between full suspension as demanded by the board and full enrichment, saying Tehran "will decide on the basis of our national interests and not subject to pressures" what do.

Iran's secretly developed enrichment program — undetected for 18 years until it was unmasked almost two years ago — has been the focus of increased world concern because of suspicions Tehran may not be telling the truth when it says it is interested in the technology only to generate power.

On Monday, the first day of the general conference, IAEA Director General Mohamed ElBaradei (search) urged Iran to heed the board's call for a full freeze of enrichment and linked activities — a message also enforced by U.S. Secretary of Energy Spencer Abraham and the European Union.