Australia has agreed a deal to sell uranium to Russia, on condition that the substance, used to generate nuclear power, is not passed on to Iran.
One of the world's largest holders of uranium reserves, Australia recently agreed a similar deal with China.
Australian Prime Minister John Howard said "stringent" controls would be in place to ensure the substance was not resold for use in nuclear weapons.
Russian President Vladimir Putin said the deal was purely an "economic" one.
Guarantees
Russia has strong ties with Tehran, whose budding nuclear programme is the source of a long-standing dispute with the international community.
Iran has maintained it is pursuing nuclear technology for peaceful purposes and has taken steps to begin the process of enriching uranium in defiance of the UN Security Council.
Russia, China and India are all keen to purchase uranium to develop civilian nuclear energy programmes.
But the sale of large quantities of the substance, used as a fissile material in nuclear weapons, has raised concerns about arms proliferation.
"Any uranium that is sold to Russia will be sold under very strict safeguards," Mr Howard said after meeting the Russian leader in Sydney ahead of a summit of Pacific Rim leaders.
"This new agreement will allow the supply of Australian uranium for use in Russia's civil nuclear power industry and provide a framework for broader co-operation on peaceful nuclear-related activities."
President Putin dismissed suggestions any uranium stocks would be used for military purposes either by Russia or any third party.
"I simply don't understand what people are talking about," he said. "We are buying uranium from Australia for purely economic reasons."
Dangers
Australia controls 40% of global uranium reserves and has been courted by several leading powers including China, which bought an estimated $250m worth of uranium last year.
Australia has agreed, in principle, to a similar deal with India, although critics of this point out that India is not signed up to the Nuclear Non-Proliferation treaty.
The Bush administration, a key ally of Australia, is believed to be comfortable with both the Russian and Indian deals, but environmental groups are disturbed by the signals they send.
"The primary danger is that supplying Australian uranium to Russian nuclear plants, it frees up Russia to do whatever it pleases with its own deposits," said Steve Shalhorn, chief executive of the Australian arm of Greenpeace.
(BBC 07/09/07)