Iran has assembled eight cascades of 164 centrifuges each -- a total of 1,312 of the machines which turn uranium gas into enriched uranium for use as either nuclear reactor fuel or to be the explosive core of atom bombs -- at a heavily-bunkered underground facility in Natanz.

"Some UF6 (uranium hexafluoride gas) is being fed into those cascades," International Atomic Energy Agency head of safeguards Ollie Heinonen said in a letter sent Wednesday to Iran's ambassador to the IAEA, Ali Asghar Soltanieh.

Pushed by fears Iran is secretly developing nuclear weapons, the UN Security Council has imposed sanctions on Iran for failing to halt uranium enrichment.

But Iran has said it wants to press ahead with large-scale enrichment at Natanz, far beyond what were previously only research levels.

Iran wants to put in first an industrial level of 3,000 centrifuges, and then eventually 54,000 of the machines.

A close observer of the IAEA said "enrichment has not really started. The centrifuges are running at low pressure," a first step to getting them up to speed.

In his letter, which was obtained by AFP, Heinonen was acknowledging the IAEA's receipt of the information about Natanz from Iran, given during an inspection April 15-16.

He also called on Tehran not to cut off inspections to a heavy-water reactor being built in Arak and which could produce plutonium, which like enriched uranium is potential nuclear bomb material.

Iran has reduced cooperation since the Security Council last month imposed a second round of sanctions on Iran, and says it will only provide notification about sites like Arak six months before nuclear material is introduced.

Arak is scheduled to go online in 2009.

Heinonen said Iran can not limit cooperation unilaterally.

Meanwhile, the IAEA has backed off on its insistence of installing surveillance cameras in Natanz.

The IAEA had agreed to "a combination of unannounced inspections and containment and surveillance measures," Heinonen said in his letter.

Diplomats told AFP that the IAEA felt it still had adequate access, even without the surveillance cameras.

Putting in the cameras was a key demand but a deal struck with Iran gives IAEA inspectors the right to make unannounced on-site inspections at Natanz, the diplomats said.

"For the moment, this is alright," said one diplomat, who said IAEA inspectors will be allowed to maintain a more permanent presence in Iran while up to now they have only gone in for specific visits. He did not elaborate.

At stake is monitoring an Iranian nuclear programme which the United States claims hides the secret development of atomic weapons.

"Iranian nuclear official Mohammad Saeedi (deputy head of Iran's atomic energy organization) met with Ollie Heinonen in Vienna in early April and they agreed that cameras would not be put into the underground hall in Natanz," the second diplomat said.

The diplomat said the agreement was to be valid for "a few months."

Heinonen had in March sent the Iranians a letter giving them until the end of that month to surveillance cameras at Natanz, with failure to do this possibly leading to further UN action against Iran.

Iran insists its nuclear programme is a peaceful effort to generate electricity.

IAEA chief Mohamed ElBaradei had said February 22 that cameras would be needed in Natanz if Iran were running more than 500 centrifuges.

But a diplomat said the red-line number has changed. "When 3,000 centrifuges are running then unannounced visits plus cameras would be required," the diplomat said.

Such a number of centrifuges could make in less than a year enough enriched uranium for an atomic bomb.

Iranian President Mahmoud Ahmadinejad had announced last week that the Islamic republic's controversial uranium enrichment work had reached an "industrial scale," a stage that requires at least 3,000 centrifuges, but did not say how many centrifuges were working.

Russia, which is building Iran's first nuclear power plant, as well as other nations had cast doubt on whether Iran had reached such an industrial stage.

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