Russia has delivered its first shipment of nuclear fuel to a reactor it is helping to build at Bushehr in Iran.
Russia's Vladimir Putin (l) cemented ties with Iran in an October visit
The two sides reached agreement last week on a schedule to finish building the plant after years of delays.
The UN has demanded that Iran halt uranium enrichment but has approved the Russian nuclear fuel deliveries.
US President George W Bush supported the move, but said it proved "the Iranians do not need to learn how to enrich" uranium for themselves.
Some Western countries fear Iran is trying to build nuclear weapons but Tehran says its programme is for peaceful power generation only.
'Threat to peace'
The Russian company building the Bushehr plant, Atomstroiexport, said the delivery of the enriched uranium fuel began on Sunday.
The head of Iran's atomic energy agency, Gholam Reza Aghazadeh, later confirmed that the first delivery had arrived, according to Iran's state-run Irna news agency.
BUSHEHR NUCLEAR PLANT
Begun in 1974 with German assistance
Work halts after Iran's 1979 Islamic revolution
Resumed in 1992 with Russian help
13 Dec: Russia and Iran agree to finish plant after numerous delays
Two pressurised water reactors
One believed near completion, could begin operating in eight months
Enriched uranium is used as fuel in nuclear power stations. When it is more highly enriched, it can be used to make nuclear weapons.
President Bush said on Monday: "If the Iranians accept that uranium for a civilian nuclear power plant, then there's no need for them to learn how to enrich.
"Iran was a threat to peace, Iran is a threat to peace and Iran will be a threat to peace if we don't stop their enrichment facilities."
There are two pressurised water reactors at the Bushehr site, one of which is reportedly near completion and likely to be the first major Iranian reactor to begin generating electricity, possibly by mid-2008.
Russian officials have previously said the plant could be operational within six months of fuel being delivered.
Iran first planned a reactor near the south-western port of Bushehr with German assistance in 1974.
Those plans were abandoned after the Islamist revolution in 1979 but the Russians picked up the project in 1992.
On 13 December, Russia and Iran agreed on a schedule to finish construction on the Bushehr plant after repeated delays.
Russia had said Iran was behind on payments. But many analysts believe Moscow delayed over Tehran's resistance to international pressure to be more open about its nuclear programme.
The United States has been leading a drive in the UN Security Council to pass a third round of sanctions against Iran.
Russia and China have co-operated with the previous two votes but a US intelligence report two weeks ago said Iran had stopped trying to develop nuclear weapons in 2003, taking some of the steam out of the American pressure.
The latest report on Iran from the UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), concluded that Tehran was being more open about some aspects of its programme, but there remained unanswered questions and uranium enrichment had not been halted despite the UN's demands.
The delivery of the nuclear fuel has removed one of the most significant practical sanctions against Tehran, says the BBC's diplomatic correspondent, Jonathan Marcus.
Russia is helping Iran build and fuel the Bushehr plant
Atomstroiexport said the containers of fuel had been inspected and sealed before delivery by the UN's nuclear watchdog, the International Atomic Energy Agency.
The company said the first delivery of 163 canisters of uranium-235 arrived at Bushehr on Sunday.
The full delivery will take up to two months, Atomstroiexport said. The fuel is lowly-enriched uranium which Russia says cannot be used in a nuclear weapon.
It said it had received assurances from Tehran that the fuel would not be used anywhere but Bushehr.
Russia urged Iran to stop enriching uranium, saying there was no longer any need.
But a senior Iranian official said his country would not halt uranium enrichment under any circumstances, Reuters news agency said.