DUBAI - Iran will press on with construction at a nuclear reactor site at Arak, Iranian Foreign Minister Mohammed Javad Zarif said on Wednesday, despite an agreement with Western powers to halt activity.

The uncompleted heavy-water research reactor emerged as one of several crucial issues in negotiations in Geneva last week, when Iran agreed with six world powers to curb Tehran’s nuclear programme for six months in return for limited sanctions relief.

Iran said it would not make “any further advances of its activities” on the Arak reactor, according to text of the agreement.

“The capacity at the Arak site is not going to increase. It means no new nuclear fuel will be produced and no new installations will be installed, but construction will continue there,” Zarif told parliament in translated comments broadcast on Iran’s Press TV. But experts have said an apparent gap in the text could allow Tehran to build components off-site to install later in the nuclear reactor. It was not immediately clear if Zarif was referring to this or other construction activity.

Tehran has said it could open the reactor as soon as next year. It says its purpose is only to make medical isotopes, but Western countries say it could also produce plutonium, one of two materials, along with enriched uranium, that can be used to make the fissile core of a nuclear bomb.

Meanwhile, Gulf Arab states called on Iran on Wednesday to fully cooperate with the UN nuclear watchdog in implementing a landmark deal with major powers.

Foreign ministers of the six Gulf Cooperation Council member states, which include leading supporters of the rebels in Syria, also urged quick action to end the conflict and expressed hope that a peace conference planned for January will help lead to a settlement. In a joint statement issued after a one-day meeting in Kuwait City, the ministers called on Iran to “fully cooperate” with International Atomic Energy Agency inspectors in implementing the agreement it reached with six major powers on Sunday. “We express our comfort at this deal, hoping that it will be a prelude for a comprehensive solution to the Iranian nuclear file,” the ministers said, referring to the interim nature of the deal reached at the weekend.

Under the agreement, which lasts for six months while negotiators bid for a lasting settlement, Iran undertook to curb parts of its nuclear programme in return for some relief from Western sanctions.

The Sunni-ruled Gulf Arab states have long been concerned about Shiite Iran’s regional ambitions and, while their governments publicly welcomed the nuclear agreement, much of the Gulf press voiced misgivings.

The deal was struck between Iran and the P5+1 - Britain, China, France, Russia and the United States, plus Germany - but the job of overseeing its implementation falls largely to the IAEA in coordination with the group.

The Gulf ministers called for the Geneva 2 peace conference on Syria, scheduled for January 22, to be “held quickly to help reach a political settlement.”

They strongly condemned the continuing “bloodshed” in Syria and the “use of internationally banned weapons against civilians.”

Gulf Arab states, like many Western governments, blame forces loyal to President Bashar al-Assad for a series of gas attacks in August that prompted a UN agreement to dismantle his regime’s chemical arsenal.

The ministers were meeting to prepare the agenda for a GCC summit in Kuwait City next month.

Meanwhile, President Hassan Rouhani said Iran’s economic problems went beyond sanctions, blaming “unparalleled stagflation” on the profligacy and mismanagement of his predecessor, hardliner Mahmoud Ahmadinejad.

In office from 2005 until August, Ahmadinejad presided over a period of unprecedented revenue growth due to high oil prices but, analysts say, squandered much of it on subsidies that pumped money into the economy and drove up inflation.

He also antagonised the United States and the West by threatening to wipe Israel off “the page of time”, repeated denials of the Holocaust and an uncompromising stance on Iran’s disputed nuclear programme.

“The stagflation in 1391 was unparalleled,” Rouhani said, referring to the Iranian year that ended in March. During that year, the economy contracted by 6 percent, while inflation rose above 40 percent, he said.

The International Monetary Fund expects Iran’s economy will shrink 1.5 percent this year in inflation-adjusted terms, after an estimated 1.9 percent contraction last year which was the biggest since 1988, when Iran’s eight-year war with Iraq ended.

Despite receiving 600 billion dollars in oil revenue over the past eight years, Rouhani said the legacy of Ahmadinejad’s two terms was around $67 billion dollars of debt. Iran’s nominal GDP was $549 billion in 2012 and will shrink to $389 billion in 2013, according to the IMF’s October outlook.

“These facts show the conditions we inherited from the previous government and in what conditions we must grapple with the problems,” Rouhani said in a speech late on Tuesday to mark his first 100 days in office.

Rouhani secured a landslide election victory in June promising a policy of “constructive engagement” with the outside world would help ease international sanctions on the Islamic Republic imposed over its nuclear programme. Iran denies seeking to develop a nuclear weapons capability.

An interim deal with six world powers clinched in Geneva on Sunday promises to bring some $7 billion-worth of relief from those sanctions, but most of the measures remain in place and Rouhani said it would take time for the economy to improve.

Nouriel Roubini, chairman of Roubini Global Economics and an economics professor at New York University’s Stern School of Business said that at this stage, the sanctions lifted would not make a big difference.

“It will still be an economy severely constrained by the fact that most of the most important sanctions are still there and, rightly, the US and great powers are cautious,” he said on the sidelines of a financial conference in Dubai.

“They want to see that Iran is not bluffing.”