Iran had previously announced that it had increased the missile's range to 2000 kilometres, an upgrade from a range pencilled in at 1300km by military experts.
 
"Iran test-fired a more accurate version of the Shahab-3 in the presence of observers," Defence Minister Ali Shamkhani said on Wednesday after a weekly cabinet meeting.

Shahab is the Persian word for meteor. Based on the North Korean Nodong-1 and modified with Russian technology, the Shahab-3 was first deployed by Iran's Revolutionary Guard in July 2003.

EU diplomats are trying to strike a deal with Iran to encourage it to give up uranium enrichment to defuse a dispute over whether Tehran is seeking nuclear arms.

'Sabre-rattling'

Washington wants to haul Iran before the UN Security Council in November for possible sanctions after a meeting of the UN nuclear watchdog.

Iran insists its missiles are for defensive purposes and would be used to counter an Israeli or US attack against its nuclear facilities.

"Iran test-fired a more accurate version of the Shahab-3 in the presence of observers"

Iran's Defence Minister Ali Shamkhani

"Iran's policy of announcing its missile tests is a matter of orchestrated sabre-rattling," said Israeli defence expert Uzi Rubin, former head of the Jewish state's Arrow missile defence programme.

"What is interesting here is the absence of any mention of the Shahab-3's increased range. By focusing instead on its accuracy, the announcement reflects a growing uneasiness in Tehran at the implications of an increased-range missile vis-a-vis the European Union," he added.

Israel's arsenal

Israeli officials have stressed the potential threat Iran's ballistic missiles pose to Europe partly as a device to deflect the attention a renewed focus on regional nuclear technology throws on its own arsenal.

Israel itself has never acknowledged having a nuclear arsenal, but foreign experts are convinced that the country has clandestinely produced between 100 and 200 nuclear warheads.

Recently, Israel ratcheted up the pressure on Iran by saying it has bought in weapons that target the Islamic Republic's underground uranium-enrichment facilities.