Under the U.S.-backed plan, Iran would send most of its low-enriched uranium (LEU) abroad for further processing to turn it into more refined fuel for a Tehran research reactor.
The West's priority is to reduce Iran's LEU stockpile to prevent any danger that the Islamic Republic might turn it into the highly enriched uranium needed for a nuclear bomb.
But politicians in Iran, which says its nuclear program is a peaceful drive to produce electricity, have voiced deep misgivings about the idea of parting with the bulk of what is seen as a strategic asset and a strong bargaining chip.
Several MPs have said Iran should buy the reactor fuel it needs rather than send its own uranium out of the country.
"We are completely opposed to the proposal on delivering uranium with 3.5 percent enrichment in exchange for uranium with 20 percent enrichment," said Alaeddin Boroujerdi, the head of parliament's national security and foreign policy committee.
"There is no guarantee they would give us fuel with 20 percent enrichment in exchange for our delivered LEU," ISNA news agency quoted him as saying.
The committee's spokesman, MP Kazem Jalali, echoed that view, saying "the demand that we should deliver all enriched nuclear material to other countries … is completely out of the question," ILNA news agency reported.
U.S. Secretary of State Hillary Clinton said on Saturday Iran should accept the plan because Washington and its allies had limited patience.
"We are willing to work toward creative outcomes, like shipping out the low-enriched uranium to be reprocessed outside of Iran, but we are not going to wait forever," she told a news conference in Jerusalem.
"Patience does have finally its limits and it is time for Iran to fulfill its obligations and responsibilities to the international community and accepting this deal would be a good beginning."
On Friday, diplomats said Iran had told the U.N. nuclear watchdog, the International Atomic Energy Agency (IAEA), it wanted fresh fuel for the Tehran reactor before it would agree to ship most of its enriched uranium to Russia and France.
Western diplomats said that major Western powers found the Iranian request unacceptable.
The West has said Iran risks a fourth round of sanctions if it fails to help defuse concerns about its atomic program.
President Mahmoud Ahmadinejad said he was hopeful talks with the world powers would continue, even though he made clear Tehran's mistrust of Western countries because of their "negative record," ISNA news agency reported.
"The Westerners know that in the absence of interaction with Iran they would not be able to manage the world," he said.
IRAN PROPOSING "DIFFERENT DEAL"
The IAEA proposal calls for Iran to transfer about 75 percent of its known 1.5 tonnes of LEU to Russia for further enrichment by the end of this year.
The material would then be shipped to France for conversion into fuel plates for the Tehran reactor that produces radio isotopes for cancer treatment.
Diplomats said Iran had yet to reply formally but had leaked demands for major changes that could unravel the tentative pact.
Iranian media reported that Tehran also wanted the LEU to be shipped out in small, staggered portions — not all in one go.
The reported conditions would undo key aspects of the deal for big powers aiming to minimize any bomb-making potential.
A senior Western diplomat said Iran was "willing only to swap a quantity of their LEU for the finished fuel assemblies" to run the Tehran reactor.
"That doesn't do it for the IAEA and for us because it doesn't remove the 1,200 kg (of LEU) in one batch right away that would show Iranian peaceful bona fides," the diplomat said.
"They are not proposing modifications … they are proposing a different deal that would shift all of the risk to the IAEA and the other parties to the deal," the diplomat added.
Mark Fitzpatrick, senior non-proliferation fellow at London's International Institute for Strategic Studies, described it as a "politically treacherous" issue for Iran.
"They (the leadership) find it hard to strike any deal with the West even though this is an obviously good deal for them," he said. "It's stalling but it is not just tactical stalling. There is real domestic turmoil in Iran."
(Additional reporting by Hashem Kalantari in Tehran, Sylvia Westall in Vienna and Mark Heinrich in London; editing by Tim Pearce)
