"The factory at Natanz has been in operation at an experimental level for several weeks," Iran's ambassador to the IAEA, Ali Akbar Salehi, said in an interview published by Kayhan newspaper late Monday.

The revelation came despite a September 12 resolution passed by the IAEA that urged Iran to cease enrichment activities, amid US allegations that the programme -- part of a bid to generate nuclear power -- is merely a cover for nuclear weapons development.

Salahi also asserted that while Iran would continue to work with the IAEA, it may reduce its level of cooperation with the agency.

"So far, on the direct orders of President (Mohammad) Khatami and to show good faith and transparency, we have cooperated beyond the accords and allowed the taking of (environmental) samples and inspections of non-nuclear sites," he said in an interview carried by state television.

Salehi said that in future Iran would go no further than its commitments under the nuclear Non-Proliferation Treaty (NPT), "while completing what has been embarked upon."

After Iran was slapped with an October 31 deadline to come clean over its nuclear programme, the Iranian foreign ministry said the level of the country's cooperation with the Vienna-based body was being reexamined.

In Vienna, diplomats said news of enrichment activities at Natanz could be a sign Tehran will give only limited cooperation with the deadline.

"This was expected to happen. It was not desired. It is not the best answer to what we have requested," a Western diplomat close to the UN nuclear watchdog told AFP.

He said it showed that Iran "might be restricted in their cooperation."

The resolution, pushed through after intensive lobbying by the United States, has been greeted with widespread anger among officials in the Islamic republic.

It demands Iran answer all the agency's questions regarding its enrichment activities, provide unrestricted access to UN inspectors and a detailed list of its nuclear-related imports.

It also calls on Iran to sign an additional protocol to the NPT, which would give inspectors increased access.

So far Iran appears to be on track to rejecting the resolution, which could see the IAEA decide to refer the matter to the UN Security Council for possible sanctions.

However there have been conflicting signals from a string of Iranian officials on how to respond to the IAEA demands, and Salahi's comments were no exception.

He said the IAEA is to send legal experts soon to Iran to continue discussions on the ambiguities of the additional protocol.

"The additional protocol is not a good protocol and amounts to interference in the affairs of states," he said.

"But, in any case, the countries which have signed the NPT must sooner or later sign up because they (the IAEA and major powers) have planned things that way," he said. "It's a bitter reality."

Earlier Monday, an Iranian deputy foreign minister, Mohsen Aminzadeh, who is a close ally of Khatami, spoke in favour of signing the additional protocol.

"If we wanted to build a nuclear bomb, then transparency wouldn't be in our interests, but if we don't want to build a nuclear bomb, which is the case, then signing the protocol and preserving our civil nuclear capacity is in our interests," said Aminzadeh.

"If the United States succeeds in creating a unified opinion against us, then our country will face major difficulties and crises."

WAR.WIRE