A team of Iranian experts are in the Austrian capital of Vienna to discuss with France, Russia, the US and the UN nuclear watchdog IAEA the terms of a deal to buy highly enriched uranium.
Western countries have proposed that Tehran exchange its low-level uranium with higher level.
Monday's talks are being seen by Western diplomats as the first chance to build on the proposals for defusing tensions over Iran's nuclear programme.
However, a source has told Iran's English-language Press TV that the country will not hold direct talks with France in Vienna "for failing to deliver its nuclear materials in the past".
Iran has sent only a junior-level technical delegation to the Vienna talks, indicating it may not be ready for a final agreement this week.
A spokesman for the Atomic Energy Organisation of Iran said that Tehran would continue its work to enrich uranium to the 20 per cent required for its research reactor should the Vienna talks fail.
Al Jazeera's Nazanine Moshiri has spoken to some traders in Tehran's grand bazaar, where the country's nuclear programme is largely viewed as a matter of national pride.
