By Fredrik Dahl
VIENNA (Reuters) - Iran could soon launch sensitive atomic activities in an underground facility deep inside a mountain, diplomatic sources said on Wednesday, a development likely to add to tension between Tehran and the West.
Iranian experts have carried out the necessary preparations at Fordow near the holy city of Qom, paving the way for the Islamic state to begin 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.
It coincides with a period of escalating tension between Western powers and Iran after a U.N. nuclear watchdog report last month said Tehran appeared to have worked on designing a nuclear weapon, and that secret research may continue.
The United States and its European allies have seized on the unprecedented document by the U.N. International Atomic Energy Agency (IAEA) to ratchet up the sanctions pressure on Iran, one of the world's largest oil producers.
Enriched uranium can be used to fuel power plants, 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.
Proliferation expert Shannon Kile noted that Iran earlier this year announced it would shift its most sensitive enrichment activity to Fordow but 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).
Iran's decision last year to raise the level of some enrichment from the 3.5 percent purity needed for normal power plant fuel to 20 percent worried Western states that saw this as bringing it significantly closer to the 90 percent needed for a bomb. Iran says the material will help fuel a research reactor.
Iran's main enrichment plant is located near the central town of Natanz. But the country said in June it would shift its higher-grade activity to Fordow, offering better protection from any military attack, and also sharply boost output capacity.
A commander of Iran's 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 foes, 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 increase the fissile isotope ratio.
A cylinder of uranium hexafluoride gas -- material that is fed into centrifuge machines to refine uranium -- had also been transferred there, the report said.
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.
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 development work of 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, has the means and components to make the more sophisticated machines in bigger numbers.
"We should not overestimate the progress," one source said, adding that Iran had tried to develop more modern centrifuges for several years.
(Editing by Giles Elgood)