"Iran is now much less worried about the US attacking them because of the mess in Iraq... They're testing the waters," Gary Samore of the London-based International Institute for Strategic Studies (IISS) said.

Samore, who edited and presented the IISS report titled "Iran's Strategic Weapons Programmes -- A Net Assessment," at a press conference in London Tuesday, said Iran would resist international diplomatic pressure.

"It will be important to apply international diplomacy in a way that does not inspire Iran to abandon all restraint and seek a nuclear weapons capability," added IISS director John Chipman.

The international community should try to stimulate more political debate within Iran about the risks of acquiring a nuclear weapons capability, said Chipman, pointing to the country's "relative openness".

But in the event of a stalemate between Iran and the United Nations "then I think people in Washington and in Tel Aviv will think much more seriously about the use of military force," Samore said.

The report emphasises that Iran's nuclear option is not imminent, Chipman said, but that Iran could produce enough highly-enriched uranium for one nuclear bomb by the end of the decade if it wanted to.

"Rather than dash for a bomb, Iran may seek gradually to acquire a much more substantial nuclear capability over a decade or more... before it decides whether to exercise a weapons option," he added.

Iran faces the threat of being referred to the United Nations Security Council over its nuclear programme, which the country's government insists is a peaceful effort to generate electricity.

On Friday, the head of the International Atomic Energy Agency, Mohammed ElBaradei, issued a tough report on Iran's failure to meet demands for cessation of all nuclear fuel activities.

Tehran has defied stiff pressure from the United States and Europe by resuming uranium conversion, a precursor to enrichment that can produce reactor fuel but can also be used for military purposes.

The election of Iranian President Mahmoud Ahmadinejad in June 2005 strengthened the hand of the the country's uncompromising supreme guide, Ayatollah Ali Khamenei, over nuclear negotiations, Samore said.

"Ahmadinejad has very little interest or for that matter very much influence when it comes to foreign policy," he noted.

Following negotiations with the European Union, Samore said Iran had reached a "tipping point" where Tehran feels strong enough to resume nuclear activities despite international pressure.

Iran, the report highlights, is also believed to be deploying up to 72 short-range and 12 medium-range missiles, which can strike targets in Israel, much of Turkey and southern Russia.

The country's chemical and biological weapons capability is more difficult to measure because of a lack of public information but greater technical expertise within Iran meant this was a possibility, Chipman said.

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