* Russia has built and supplied fuel for Bushehr

* Iran says is symbol of resilience to sanctions

* Will continue to enrich uranium despite Russian supply

(Adds U.S., IAEA comment)

By Katya Golubkova and Ramin Mostafavi

BUSHEHR, Iran, Aug 21 (Reuters) - Iran began fuelling its first nuclear power plant on Saturday, a potent symbol of its growing regional sway and rejection of international sanctions designed to prevent it building a nuclear bomb.

Iranian television showed live pictures of Iran's nuclear chief Ali Akbar Salehi and his Russian counterpart watching a fuel rod assembly being prepared for insertion into the reactor near the Gulf city of Bushehr.

"Despite all the pressures, sanctions and hardships imposed by Western nations, we are now witnessing the start-up of the largest symbol of Iran's peaceful nuclear activities," Salehi told a news conference afterwards.

Iranian officials said it would take two to three months before the plant starts producing electricity and would generate 1,000 megawatts, a small proportion of the nation's 41,000 megawatt electricity demand recorded last month.

Russia designed, built and will supply fuel for Bushehr, taking back spent rods which could be used to make weapons-grade plutonium in order to ease nuclear proliferation concerns.

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For a timeline, click on link.reuters.com/xat36n

For a graphic on Bushehr link.reuters.com/vem45n

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Saturday's ceremony comes after decades of delays building the plant, work on which was initially started by German company Siemens in the 1970s, before Iran's Islamic Revolution.

The United States criticised Moscow earlier this year for pushing ahead with Bushehr given persistent Iranian defiance over its nuclear programme.

But U.S. State Department spokesman Darby Holladay said on Saturday Washington did not view the Bushehr reactor as a nuclear proliferation risk, partly because of Russia's role in providing nuclear fuel and taking it back when it is spent.

"Russia's support for Bushehr underscores that Iran does not need an indigenous enrichment capability if its intentions are purely peaceful," Holladay said.

Moscow supported the latest U.N. Security Council resolution in June which imposed a fourth round of sanctions and called for Iran to stop uranium enrichment which, some countries fear, could lead it to obtain nuclear weapons.

"The construction of the nuclear plant at Bushehr is a clear example showing that any country, if it abides by existing international legislation and provides effective, open interaction with the IAEA (International Atomic Energy Agency), should have the opportunity to access peaceful use of the atom," Sergei Kiriyenko, head of Russian state nuclear corporation Rosatom, told the news conference.

The Vienna-based IAEA said the agency regularly inspected Bushehr. "The Agency is taking the appropriate verification measures in line with its established safeguards procedures," spokesman Ayhan Evrensel said.



CONCERN

The fuelling of Bushehr is a milestone in Iran's path to harness technology which it says will reduce consumption of its abundant fossil fuels, allowing it to export more oil and gas and to prepare for the day when the minerals riches dry up.

Iran's neighbours, some of whom are also seeking nuclear power, are wary of Tehran's nuclear ambitions and its growing influence in the region, notably in Iraq where fellow Shi'ites now dominate and Lebanon, where it is a backer of Hezbollah.

While most nuclear analysts say Bushehr does not add to any proliferation risk, many countries remain deeply concerned about Iran's uranium enrichment.

It disclosed the existence of a second enrichment plant only last year and announced in February it was enriching uranium to a level of 20 percent, from about 3.5 percent previously, taking it closer to weapons-grade levels and well above what is needed to fuel a power plant.

Iran, which says its nuclear programme is entirely peaceful, said it needed to enrich to that level as a deal with major world power and the IAEA to supply special fuel for a medical reactor in Tehran had fallen apart.

Israel, widely assumed to be the only Middle East country to have nuclear weapons, has said a nuclear-armed Iran would be a threat to its existence, raising concerns Israel could attack Iran's nuclear sites.

However, Iranian President Mahmoud Ahmadinejad dismissed the prospect of an Israeli strike.

"I rule out any such attack because the Israeli entity is too weak to do so," he told Al Jazeera on Thursday. "Iran's response will be so strong and decisive that it will make the attackers regret their decision to hit our installations." (Writing by Robin Pomeroy; Editing by Charles Dick)



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