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Iran is forging ahead with a nuclear fuel enrichment program in defiance of world pressure and stonewalling UN probes spurred by fears it secretly wants atomic weapons, an International Atomic Energy Agency (IAEA) report said on Monday.

The report by IAEA director Mohamed ElBaradei was circulated to IAEA board members before they meet on March 6 to discuss it. The report will be forwarded to the UN Security Council, which could consider sanctions.

"It is regrettable and a matter of concern that the uncertainties related to the scope and nature of Iran's nuclear program have not been clarified after three years of intensive agency verification," said the report, obtained by Reuters.

"We are not yet at the point to be able to conclude that this is a (peaceful nuclear program)," said a senior official familiar with IAEA investigations, who asked not to be named.

The report said Iran had begun vacuum-testing a cascade of 20 centrifuges -- machines that purify uranium UF6 gas into fuel suitable for nuclear power plants or, if enriched to high levels, for bombs -- at its Natanz pilot enrichment plant.

Iran had also begun substantial renovations of Natanz's system handling UF6. IAEA monitoring had been impaired by Iran's removal of agency safeguards seals from centrifuge-related raw materials and components, the report said.

Tehran had further told the IAEA it would start installing the first 3,000 of a planned 50,000 centrifuges in the fourth quarter of 2006, the 11-page report went on.

Some 3,000 centrifuges of the type Iran has at Natanz working nonstop for a year would produce the 20 kg (45 pounds) of highly enriched uranium (HEU) needed for one atomic warhead, nuclear analysts say.

Iran's moves ended a 2 1/2-year enrichment moratorium agreed during since-collapsed talks with EU powers which had offered incentives if it curbed its nuclear ambitions, and spurred the IAEA board to report Tehran to the Security Council on February 4.

'Significant escalation'

"ElBaradei has now reported Iran's intention to go beyond so-called R&D (research and development) and begin installing centrifuges in a full-scale enrichment facility. That's a significant escalation," said a senior Western diplomat.

"Today's report reinforces the board's decision to report Iran to the Security Council since it validates ... international mistrust in the peaceful nature of its program.

"It shows how Iran in the face of growing international concern continues its calculated approach to produce material necessary for nuclear weapons," the diplomat added.

Iran denies seeking nuclear arms, saying its atomic energy program aims solely to generate electricity. But it hid nuclear fuel development from the IAEA for 18 years until 2003 and calls for Israel's destruction, stoking Western suspicions.

ElBaradei's report emerged as the West reacted with deep skepticism to a tentative Russia-Iran deal on uranium enrichment meant to help resolve the nuclear crisis and avert Security Council steps toward sanctions, opposed by Moscow and Beijing.

The Iran nuclear energy program chief said on Sunday Tehran had reached a "basic" agreement with Moscow on a proposed joint venture in which Russia would provide enriched uranium to the Islamic Republic. But Russian officials were later quoted as saying Iran had so far made no commitment to renounce home-grown enrichment as demanded by Russia and major Western powers.

ElBaradei's report said Iran had also produced 85 metric tonnes of UF6 gas at its uranium-conversion facility in Isfahan since September 2005, which would be enough for several atomic bombs once Iran masters industrial-scale enrichment technology.

Probes had not uncovered any diversions of nuclear materials into bomb-making, it said, but the IAEA still could not verify there were no covert atomic activities in the Islamic Republic.

Iran's cancellation of voluntary compliance with short-notice IAEA inspections in retaliation for the February 4 IAEA board decision would make it all that much harder to track down possible underground nuclear work, the report noted.

It made clear Iran had done little to heed the February 4 board resolution except for giving slightly more but inadequate information about intelligence reports of military involvement in nuclear research and about equipment linked to a military-run installation razed by Iran before inspectors could reach it.

"The fact that three years have gone and we still have major open issues, including 'dual-use' equipment with a military connection popping up now and then, shows how difficult it is to get to the bottom of their program," the senior official said.

The IAEA board demanded Tehran stop impeding investigations.

"We didn't learn much more this month. Iran is inching forward. With enrichment resuming, it makes the whole atmosphere much more negative," said another official close to the IAEA, alluding to the specter of a showdown in the Security Council.

(Chinadaily.com via agencies February 28, 2006)