The head of Iran's Atomic Energy Organization said Saturday that the country had produced its first nuclear fuel pellets for use in a heavy water reactor, which is still under construction.

The uranium oxide pellets are made using a process separate from the uranium enrichment at the heart of a standoff between Iran and the U.S., which accuses the clerical government of secretly pursuing a nuclear weapons program.

But the Arak reactor, which began construction in central Iran in 2004, is a concern to the West because the spent fuel from a heavy-water facility can be used to produce plutonium, which in turn can be used for a nuclear weapon. U.N. inspectors last visited the reactor in July, and Iran has said it hopes to have Arak up and running by 2009.

"Fuel pellets to be used in the 40-megawatt Arak research reactor have been produced," Iranian Vice President Gholam Reza Aghazadeh said, according to the official IRNA news agency.

Iran is developing Arak parallel to its better-known light-water reactor program, like the one being built with Russian help at Bushehr. Such light-water reactors use enriched uranium that, at far higher levels of enrichment, can also be used to produce the fissile material for a nuclear weapon.

Iran insists its nuclear program is solely for peaceful purposes including generating electricity.

The U.N. nuclear watchdog, the International Atomic Energy Agency, had no comment Saturday.