Iran denial

In response, Iran denied it was obstructing the agency's inspections.

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Mohammad Saeedi, the deputy head of Iran's atomic energy organisation, said on Wednesday: "There are no obstacles to lawful and legal IAEA inspections of Iran's nuclear facilities."

The UN Security Council imposed a first round of sanctions last December over fears Iran was seeking nuclear weapons.

The US told Iran to end its "defiance" of UN demands to halt sensitive nuclear work and said it would work with allies on "next steps".

Gordon Johndroe, White House national security spokesman, said the IAEA assessment "is a laundry list of Iran's continued defiance of the international community and shows that Iran's leaders are only furthering the isolation of the Iranian people".

Sabre-rattling
 
Two US aircraft carriers entered the Gulf on Wednesday in what Mustafa Alani, a Gulf analyst, said was "a clear message to Iran that a military option is available to Washington".

Britain said it would consult its allies on what to do next.

A UK foreign office spokesman said: "We believe that full suspension of Iran's enrichment activities is the only acceptable confidence-building measure to allow formal talks to begin."

The confidential report by Mohamed ElBaradei, the IAEA's director, said that as of May 13, at an underground facility in Natanz, Iran was sustaining 1,312 centrifuge machines with the uranium gas need to make enriched uranium.

A senior official close to the IAEA said Iran could reach its goal of industrial scale production with 3,000 centrifuges running by the end of June.

The official said: "You see from these numbers that the Iranians are starting to feed substantial amounts of uranium and are able to maintain this feed, which shows they are able to enrich uranium."

Access blocked

The IAEA report said Iran has "reached enrichment levels up to 4.8 per cent U-235," enough for fuel, but far below the 90 per cent enrichment needed to make weapons.

The IAEA reported that its ability to monitor the Iranian nuclear programme had "deteriorated" due to a lack of co-operation.

The official said that since April 13 Iran has blocked access to a heavy-water reactor it is building that could produce plutonium, another potential weapons material.

The IAEA board will meet in June to review the report and this is expected to lead to a new UN Security Council meeting to discuss the situation.