By Robin Pomeroy and Mitra Amiri
TEHRAN (Reuters) - Iran will shift its production of higher grade uranium to an underground bunker and triple its production capacity, it said on Wednesday in a defiant response to accusations it is trying to produce atomic bombs.
"This year, under the supervision of the (International Atomic Energy) Agency, we will transfer 20 percent enrichment from the Natanz site to the Fordow site and we will increase the production capacity by three times," the head of Iran's atomic energy agency, Fereydoun Abbasi-Davani, told reporters after a cabinet meeting, the state broadcaster IRIB reported.
Iran only disclosed the existence of the Fordow site, in a mountain bunker, in September 2009, after Western intelligence had detected it and said it was evidence of covert nuclear work.
The decision to move production there and increase output drew immediate condemnation from the West, which has imposed a series of sanctions on Iran to try to force it to halt enrichment -- a process that can make weapons material if done to a much higher level.
"This announcement is a provocation," the French Foreign Ministry said in a statement.
"It reinforces the international community's existing concerns over the intransigence of the Iranian authorities and their persistent violation of international law."
Iran has always denied it is developing nuclear weapons and says it is enriching uranium for electricity production and medical applications.
But its decision last year to raise the level of enrichment from the 3.5 percent purity needed for normal power plant fuel to 20 percent worried countries that saw it as a significant step toward the 90 percent needed for bombs.
The Vienna-based IAEA, whose board was due to discuss Iran's nuclear program, probably later on Wednesday, said it had only learned of the plan from media reports.
"Iran has not yet informed the agency of any such decision," IAEA spokeswoman Gill Tudor said.
Iranian media portrayed the announcement as a defiant response to tightened sanctions and IAEA chief Yukiya Amano's assertion on Monday that he had received new evidence of possible military dimensions to Iran's nuclear work.
President Mahmoud Ahmadinejad accused Amano of taking orders from Washington.
After Ahmadinejad said on Tuesday that no incentive from world powers could persuade Iran to give up enrichment, President Barack Obama said further sanctions were likely.
"Iran certainly is raising the stakes," said Mark Fitzpatrick, a leading proliferation expert at the London-based International Institute for Strategic Studies.
"There is absolutely no justification for producing any more 20 percent enriched uranium at all, since any reactors that would use it are far off into the future," he said. "Tripling the production rate would be highly provocative."
Iran says it needs 20 percent uranium to make fuel for a medical research reactor after talks on a nuclear fuel swap -- under which other countries would have supplied the higher grade fuel -- broke down.
"After we increase the production capacity in Fordow by three times, then we will stop the 20 percent section of the Natanz site and will transfer it completely to Fordow," Abbasi-Davani said, adding the transfer would start this year.
The shift from Natanz, near Isfahan in central Iran, to the Fordow site near Qom, south of the capital, will shield the enrichment work from air strikes that Israel and the United States have not ruled out as a last-ditch way to stop Iran getting the bomb, Fitzpatrick said.
In its latest report on Iran, in late May, the agency said Iran had told it in February of plans to begin feeding nuclear material into enrichment cascades at Fordow "by this summer."
But the IAEA added that as of May 21 no centrifuges had been introduced into the facility.
Abbasi-Davani said Iran had completed technical development of a new generation of centrifuges and they would be installed at both sites.
(Additional reporting by Fredrik Dahl and Sylvia Westall in Vienna and Vicky Buffery in Paris; Writing by Robin Pomeroy; editing by Tim Pearce)