Iran has made a fresh nuclear offer, aiming to exchange low-grade enriched uranium for higher level enriched uranium on its southern island of Kish.

But the US says the move is inconsistent with a draft plan proposed by the UN nuclear watchdog, the International Atomic Energy Agency.

Iranian Foreign Minister Manouchehr Mottaki made the offer in Bahrain. He said Iran is willing to exchange 400-kilograms a third of its stockpile of 3.5-percent enriched uranium, for a higher grade.

Responding to the remarks, the US says Iran risks increasing sanctions.

Susan Rice, US Ambassador to UN, said, "I have got no problem using the word sanctions, that is by definition, including in the realm of action."

The ambassador also indicated the country needs to change its plan fast.

Susan Rice, US Ambassador to UN, said, "Time is short, and we have not yet seen the kind of response from Iran that we think would be in their interest and in the interest of international peace and security."

The UN-proposed draft says most of Iran's existing low-grade enriched uranium should be shipped to Russia and France by the end of 2009. There it will be processed into fuel rods with a purity of 20 percent. That higher-level enriched uranium would be transported back to Iran for medical use.

Iran rejected the deal, demanding a simultaneous exchange between low and higher level enriched uranium inside the country.