VIENNA Iran could soon begin sensitive atomic activities in an underground facility deep inside a mountain, diplomatic sources said on Wednesday, a move that would up the ante in a stand-off with big powers demanding Tehran curb such work.
Iranian experts have carried out the necessary preparations at Fordow near the Shi'ite Muslim holy city of Qom, paving the way for the Islamic Republic to start higher-grade uranium enrichment at the site on a former military base.
The machines, equipment and nuclear material needed have been transferred and installed at Fordow, the sources added, suggesting the work itself -- until now conducted above ground at another location -- could start when Iran takes the decision.
"They are ready to start feeding," a diplomatic source said, referring to the process in which low-enriched uranium gas is refined by centrifuges to increase the fissile isotope ratio.
Tension is escalating between Western powers and Iran after a U.N. nuclear watchdog report last month that said Tehran appeared to have worked on designing a nuclear weapon, and that secret research to that end may be continuing.
The United States and its European allies have seized on the unprecedented document by the U.N. International Atomic Energy Agency (IAEA) to crank up the sanctions pressure on Iran, one of the world's largest oil producers.
Enriched uranium can be used to fuel power plants and other types of reactors, which is Iran's stated aim, or provide material for atomic bombs if processed much further, which the West suspects is the country's ultimate intention.
Nuclear proliferation expert Shannon Kile noted that Iran earlier this year announced it would shift its most sensitive enrichment activity to Fordow but said that the actual start would still be significant.
"Obviously, for people who are concerned about Iran's ability to 'break out' and to enrich to weapons-grade this is a pretty good step along that route," said Kile, of the Stockholm International Peace Research Institute (SIPRI) think-tank.
Iran's decision last year to raise the level of some enrichment from the 3.5 percent purity needed for civilian power plant fuel to 20 percent worried Western states that feel this will bring Tehran much closer to the 90 percent suitable for an atomic bomb. Iran says the 20 percent material will solely replenish its fuel stock for a medical research reactor.
Iran's main enrichment plant is located near the central town of Natanz. But the Iranian leadership said in June that it would shift its higher-grade activity from Natanz to Fordow, a site that would offer better protection from any military attack and could sharply boost output capacity.
A commander of the elite Revolutionary Guards was quoted by the semi-official Mehr News Agency on Wednesday as saying that Iran will move its uranium enrichment plants to safer sites if necessary, without elaborating.
The United States and Israel, Iran's arch-adversaries, have not ruled out military action if diplomacy fails to resolve the long-running nuclear dispute, which has the potential to spark a wider conflict in the Middle East.
Last month's IAEA report said Iran had installed two cascades -- or interlocked networks -- of 174 centrifuges each at Fordow. Centrifuges spin at supersonic speeds to refine uranium.
A large cylinder of uranium hexafluoride gas -- material that is fed into centrifuges -- had also been transferred there.
Iran only disclosed the existence of Fordow to the IAEA in September 2009 after learning that Western intelligence agencies had detected it.
Tehran says it will use 20 percent-enriched uranium to convert into fuel for a research reactor making isotopes to treat cancer patients, but Western officials say they doubt that the country has the technical capability to do that.
Moreover, they say, Fordow's capacity -- a maximum 3,000 centrifuges -- is too small to churn out industrial quantities of low-enriched uranium required to keep civilian nuclear power plants running, but ideal for yielding the lesser amounts of high-enriched product typical of a nuclear weapons programme.
Western experts say tightening sanctions, technical hurdles and possible cyber sabotage have slowed Iran's atomic advances.
But it is still amassing low-enriched uranium and now has enough for 2-4 bombs, if refined much more, the experts say.
Iran has also stepped up efforts to develop more advanced centrifuge models that would enable it to enrich uranium faster than with the breakdown-prone IR-1 machines it is now using, the diplomatic sources said.
At a research facility in Natanz, it has started feeding a network of some 160 so-called IR-2m centrifuges with uranium hexafluoride gas to test their performance.
If Iran eventually succeeds in introducing the more modern machines for production, it could significantly shorten the time needed to stockpile enriched uranium.
But it is unclear whether Tehran, subject to increasingly strict international sanctions restricting its ability to obtain nuclear technology abroad, has the means and components to make the more sophisticated machines in bigger numbers.
"We should not overestimate the progress," one diplomatic source said, adding that Iran had tried to develop more modern centrifuges for several years.
(Editing by Mark Heinrich)