Iran has started small-scale enrichment of uranium — a process that can produce fuel for nuclear reactors or bombs, diplomats said Monday.

"Uranium gas has been fed into three machines," one senior diplomat familiar with Iran's nuclear file said on condition of anonymity because he was not authorized to speak on the matter.

Meanwhile, in a fresh display of brinksmanship, Iran on Monday postponed talks with Moscow on a plan to enrich its uranium in Russia to allay concerns it is seeking to develop nuclear weapons.

The talks with Russia were scheduled for Thursday but have been postponed indefinitely because of the "new situation," said presidential spokesman Gholamhossein Elham. The "new situation" is language Iran uses for a decision earlier this month by the International Atomic Energy Agency's to report Iran to the U.N. Security Council because of uncertainty about Tehran's nuclear intentions.

Iran maintains its nuclear program is designed soley to generate electricity, but the United States and some allies claim the program is a cover for producing an atomic bomb.

To produce significant amounts of enriched uranium, gas must be fed into hundreds of such machines. Uranium enriched to a low degree can be used for nuclear reactors, while highly enriched uranium is suitable for warheads.

The IAEA is due to issue a report on Iran at its March meeting, after which the Security Council is expected to consider taking steps against the country, which could include sanctions.

Elham said Monday that Iran was not delaying the resumption of uranium enrichment until after the IAEA meeting, but he did not elaborate.

Moscow has proposed that Iran ship its uranium to Russia, where it would be enriched to a level suitable for nuclear reactors. It would then be returned to Iran to be used in its Russian-built reactor at Bushehr, which is due to start operations later this year.

The plan, backed by the United States and European Union, was an attempt to avoid international objections to Iran's enriching uranium by providing oversight so no weapons would be made. Iran had said the plan did not fulfill its requirements but was worth pursuing in negotiations.

Iran strongly protested the referral to the Security Council, which was supported by Russia, usually one of Tehran's allies.

Elham said the talks will reconvene at a time of "mutual agreement."

Russia's Foreign Ministry said Monday that Foreign Minister Sergey Lavrov would discuss Tehran's nuclear program with European Union leaders in Vienna this week. It did not mention Elham's announcement.

Elham also reiterated President Mahmoud Ahmadinejad's statement Saturday that Iran will "revise" its policy toward IAEA regulations and the Nuclear Nonproliferation Treaty if they are used against the country — a veiled threat to withdraw from the pact.

Elham said the world must recognize Iran's rights as a signatory to the treaty and regulations. "Otherwise there is no reason to continue our current nuclear policy while we are deprived of the positive aspects of the treaty."

The United States and its allies accuse Iran of seeking to build a nuclear bomb under cover of a peaceful nuclear program.

After the IAEA voted on Feb. 4 to report Iran to the Security Council, it ended voluntary cooperation with the agency and announced it would start large-scale uranium enrichment and bar surprise inspections of its facilities. It has yet to officially announce whether uranium enrichment has begun.

Tehran repeatedly has stressed the nuclear arms control treaty allows it to pursue a nuclear program for peaceful purposes and says it will never give up the right to enrich uranium to produce nuclear fuel.

Elham also repeated Iran's line that if the Security Council imposes sanctions on Iran, they will backfire.

"If some Western countries, provoked by Israel, intend to put pressure on Iran, then they will also lose. We do advise the United States and Europe to decide in a rational and prudent way," he said.