Dismissing American concerns about Iran's nuclear ambitions, Russia Sunday cemented its commitment to Iran's atomic-energy program by signing a deal for the supply and return of Russian nuclear fuel for Iran's Bushehr reactor.

The agreement takes Iran a significant step closer to becoming a nuclear-energy power, and builds on an $800 million contract for Russia to finish the plant in Bushehr, in southwestern Iran along the coast of the Persian Gulf.

Washington frequently criticizes Iranian-Russian nuclear cooperation, a point raised again by President Bush during a summit last Thursday with Russian President Vladimir Putin. Spent nuclear fuel can be reprocessed to yield plutonium, which can be used to make nuclear bombs.

The fuel deal is expected to enhance Iran's capabilities, but nonproliferation experts and diplomats say it also adds new safeguards. Potential weapons capability, they say, would be more likely to arise from Iran's efforts to create its own self-contained fuel cycle.

"It would be impractical to enrich natural uranium to weapons grade in bomb quantities ... using the pilot facility that [the Iranians] have," says Mike Levi, a nuclear-security expert at King's College London. "The same could not be said if they are starting from reactor fuel. Of course, it would be very obvious if they moved anything [toward making a bomb].

"My inclination is that this is a deal that can be done right," says Mr. Levi. "Whether it is being done right, I don't know.... It's a manageable risk."

The fuel deal comes on the eve of a meeting in Vienna Monday of the 35- member board of governors of the International Atomic Energy Agency (IAEA), which discusses Iran's case every three months. In the past two years, IAEA inspections have uncovered nuclear projects in Iran that were kept secret for 18 years.

IAEA officials say that nothing new has turned up on the Iran file for six months; Mr. Putin says he is "convinced" that Iran has rejected nuclear weapons.

"This is a very important incident in the ties between the two countries, and in the near future a number of Russian experts will be sent to Bushehr to equip the power station," said Russia's nuclear power minister Alexander Rumyantsev, who signed the deal in Bushehr after two years of negotiations.

The first shipment of 90 tons of enriched-uranium fuel has already been produced and is waiting in Siberia. Iran has said it wants to build a handful of reactors, and Russia hopes to win those lucrative contracts.

Russia will supply the fuel to run the Bushehr plant, which is scheduled to be operational by late next year, and then send back all the spent fuel to Russia. "The potential for mischief is minimal," says a Western diplomat in Vienna who is close to the IAEA. "There is always a chance that the stuff could be diverted, but then it would be known immediately, by [the IAEA] and Russia. It would be a huge red flag."

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