IAEA fears Iran working now on nuclear warhead

Iranian President Mahmoud Ahmadinejad waves to journalists after a news conference in Tehran February 16, 2010.

VIENNA/WASHINGTON (Reuters) - The U.N. nuclear watchdog said on Thursday it fears Iran may be working now to develop a nuclear-armed missile, as Washington warned Tehran of "consequences" for ignoring international demands to stop its atomic program.

In unusually blunt language, an International Atomic Energy Agency report for the first time suggested Iran was actively pursuing nuclear weapons capability, throwing independent weight behind similar Western suspicions.

The IAEA seemed to be cautiously going public with concerns arising from a classified agency analysis leaked in part last year which concluded that Iran has already honed explosives expertise relevant to a workable nuclear weapon.

The report also confirmed Iran had produced its first small batch of uranium enriched to a higher purity -- 20 percent.

Both developments will intensify pressure on Iran to prove it is not covertly bent on "weaponizing" enrichment by allowing unfettered access for IAEA inspectors and investigators, something it rejects in protest at U.N. sanctions.

The United States is already leading a push for the U.N. Security Council to impose a fourth round of sanctions on Iran because of suspicions it may be developing nuclear weapons and has received declarations of support from Russia, which has until now been reluctant to expand sanctions.

"We always said that if Iran failed to live up to those international obligations, that there would be consequences," White House spokesman Robert Gibbs told reporters aboard Air Force One as President Barack Obama flew to a political event.

A senior Obama administration official said the IAEA report showed an "increasing pattern of non-cooperation" by Iran with the U.N. watchdog. The report also documented "significant technical problems" that Iran continues to have with its nuclear program, the official told reporters.

Tehran says its nuclear program is meant only to yield electricity or radio-isotopes for agriculture or medicine. It took an opposing view of the report's conclusions.

"The IAEA's new report confirmed Iran's peaceful nuclear activities and the country's non-deviation toward military purposes," Iran's envoy to the IAEA, Ali Asghar Soltanieh, told the state news agency IRNA.

INTELLIGENCE REPORTS

For several years, the IAEA has been investigating Western intelligence reports indicating Iran has coordinated efforts to process uranium, test explosives at high altitude and revamp a ballistic missile cone in a way suitable for a nuclear warhead.

In 2007, the United States issued an assessment saying Iran had halted such research in 2003 and probably not resumed it.

But its key Western allies believe Iran continued the program -- and the IAEA report offered independent support for that perception for the first time.

"The information available to the agency is extensive ... broadly consistent and credible in terms of the technical detail, the time frame in which the activities were conducted and the people and organizations involved," the report said.

"Altogether this raises concerns about the possible existence in Iran of past or current undisclosed activities related to the development of a nuclear payload for a missile."

IAEA's new chief, Yukiya Amano, is seen as more inclined to confront Iran than his predecessor, Mohamed ElBaradei, who retired on December 1.

"Now we see from (available intelligence) that certain activities may have continued after 2004," said a senior official close to the IAEA. "We want to find out from Iran what they've had to do with these nuclear explosive-related activities."

The U.S. director of National Intelligence concluded last year that Iran would not be technically able to devise a nuclear weapon before 2013. But a new intelligence estimate is due soon.

Iran has dismissed the intelligence reports cited by the IAEA as fabrication but failed to provide its own evidence. Tehran has boycotted contact with the IAEA on the matter for 18 months.

The report, to be considered at a March 1-5 meeting of the IAEA's 35-nation board, said it was vital for Iran to cooperate with IAEA investigators "without further delay."

HIGHER ENRICHMENT

Last week, Iran announced a start to higher-scale enrichment, saying it was frustrated at the collapse of an IAEA-backed plan for big powers to provide it with fuel rods for nuclear medicine made from uranium refined to 20 percent purity.

The IAEA report complained that Iran had begun feeding low-enriched uranium (LEU) into centrifuges for higher refinement before inspectors could get to the scene in the Natanz pilot enrichment facility.

"We have expressed our dissatisfaction," said the senior official close to the IAEA. "It is of paramount importance to have this information in a timely way to make sure there are no undeclared activities or facilities in Iran."

The big powers accused Iran of reneging on an agreement to ship out two-thirds of its LEU reserve to be turned into fuel rods for the medical reactor. This would have prevented Iran retaining enough of the material to fuel a nuclear weapon, if it were refined to about 90 percent purity.

Only France, one party to the U.N. draft deal, and Argentina are known to possess the technology. So analysts ask why Iran would enrich uranium well above its needs, except to lay the groundwork for producing bomb-grade uranium.

The report further said that Iran had increased its LEU stockpile by some 300 kg (660 pounds) to 2.06 tons since November -- enough for one or two nuclear bombs if enriched to 90 percent purity.

The IAEA said over nine-tenths of the LEU stockpile had been earmarked for enrichment up to 20 percent, a significant mark as further enrichment up to 90 percent may need only a few months.

But the report also attested to stagnating capacity at Natanz. It said the number of operating centrifuges had dropped to 3,772 from nearly 4,000.

This was well under half of all the machines installed in Natanz, the report indicated. Analysts and diplomats close to the IAEA say Iran may be having serious mechanical problems in keeping thousands of antiquated centrifuges running in unison.

But the senior official said Iran appeared to be shifting focus to a second enrichment site at Fordow near Qom, which Iran has said will preserve the program if foes bomb Natanz.

(Editing by Eric Beech and John O'Callaghan)