The United States, which accuses Tehran of seeking nuclear weapons and has not ruled out the option of military action to bring Iran to heel, said it was "very concerned" by the announcement.

"Today... this country has joined the countries that produce nuclear fuel on an industrial scale," Ahmadinejad said at the uranium enrichment plant in the central town of Natanz in a speech to mark a national nuclear technology day.

Iran's atomic energy organisation chief Gholam Reza Aghazadeh said the country had started mass production of the centrifuges, which are set up in long cascades to enrich the uranium from a gas feedstock.

"Today, with the start of mass-producing centrifuges and the start of uranium enrichment on an industrial phase, another step was taken for the flourishing of the Islamic republic," Aghazadeh said.

Enrichment of uranium is the key sticking point in the standoff between Iran and the West as the process can produce nuclear fuel but in highly extended form can also make the fissile core for an atomic bomb.

Iran insists its nuclear drive is solely aimed at generating energy.

Iran's long held target has been to have 3,000 centrifuges working at the plant and the announcements indicate it has now well exceeded the two cascades of 164 centrifuges it had declared until now.

The vice president of Iran's atomic energy organisation, Mohammad Saeedi, said Iran would not reveal the number of centrifuges that it has put in place at the plant.

"The number of centrifuges at the moment is clear but we do not want to announce how many," Saeedi said, telling reporters to wait for the UN nuclear watchdog to release the information.

In Vienna, the International Atomic Energy Agency (IAEA) declined to comment on the news coming out of Iran and said its inspectors would report to the agency's board of governors at their next meeting which starts on June 11.

Days after he announced the release of 15 British sailors to end a potentially dangerous standoff with London, Ahmadinejad vowed Iran would not allow world powers to "put obstacles" in the path of its nuclear programme.

The United States lost little time in expressing its growing frustration with Iran.

"We are very concerned about Iran's announcement that they entered an 'industrial stage' of nuclear fuel production," national security spokesman Gordon Johndroe told reporters.

A British Foreign Office spokesman described Ahmadinejad's announcement as "a further breach of International Atomic Energy Agency and UN resolutions."

The European Union renewed its calls for Iran to suspend uranium enrichment.

"This does nothing to change our position -- Iran must cooperate fully with the IAEA and follow the United Nations resolutions," said Ton Van Lierop, a spokesman for the EU executive arm, the European Commission.

UN chief Ban Ki-moon said: "It is very important for any member country to fully comply with Security Council resolutions. I urge the Iranian government to do so."

In an indication of further tensions ahead, lead nuclear negotiator Ali Larijani warned that Iran would quit the nuclear Non-Proliferation Treaty if international pressure on its enrichment programme continued.

"If they pressure us further, we will have no choice but to reconsider our membership of the NPT," thus reducing cooperation with the IAEA which conducts inspections of atomic plants under the treaty, Larijani said.

The atomic technology day marks the first anniversary of Iran's production of uranium sufficiently enriched to make nuclear fuel, and was being marked by a string of events at key installations across the country.

State-run bus and metro travel in Tehran were made free for the day in celebration, and bells at Iranian schools rang out in unison at 9 am local time, state television reported.

The day was held to mark Iran's announcement last April that it had succeeded in enriching uranium to 3.5 percent, good enough for nuclear fuel but still well off the 90 percent plus levels required to make an atomic weapon.

earlier related report
Iranian leader's nuclear defiance proves sanctions were justified: US
Washington (AFP) Apr 09 - Iran's defiant announcement Monday that it had expanded its nuclear enrichment program proves that UN sanctions against Tehran were justified, the State Department spokesman said.

Spokesman Sean McCormack called a speech in which Iranian President Mahmoud Ahmadinejad said the Islamic republic would defend its atomic program "to the end" a "missed opportunity" by the increasingly isolated regime in Tehran.

Ahmadinejad said in a speech at Iran's main nuclear site that the country now was producing enriched nuclear fuel "on an industrial scale" in defiance of UN demands it suspend the program, which the West fears is ultimately aimed at producing nuclear arms.

"It's quite clear that this is in defiance of the international community's calls for Iran to suspend its enrichment-related activities and to enter into negotiations," McCormack told reporters.

"It points to the idea that the actions that we are taking in concert with members of the Security Council are the right ones to take, that they're legitimate based on Iran's behavior," he said.

"The speech today only further justifies the action that the Security Council has taken," he said, referring to two sanctions resolutions adopted against Iran by the world body in December and March.

Iran insists its nuclear reprocessing work is designed only to provide fuel for a civilian nuclear power industry, but McCormack said there was a growing consensus of international powers who "don't believe Iranian assurances that their program is peaceful in nature."

The UN nuclear watchdog, the International Atomic Energy Agency, is due to publish its latest report on May 24 on the state of Iran's enrichment program and the UN Security Council could then move to further toughen sanctions against Tehran.

McCormack declined to comment on a separate statement by Iran's lead nuclear negotiator, Ali Larijani, threatening to pull out of the nuclear Non-Proliferation Treaty if Iran is subjected to further international pressure.

Despite the latest signs of Iran's defiance, US Secretary of State Condoleezza Rice plans to attend a ministerial meeting May 3-4 of Iraq's neighbors, including the Iranians, McCormack said.

US officials said last week that Rice could hold bilateral talks with her Iranian counterpart, Manouchehr Mottaki, on the sidelines of the meeting.

"What we are looking for is reasonable Iranian leaders who will do the cost-benefit calculation and see that it is not to the benefit of the Iranian people to continue to pursue the course on which they find themselves now," Mccormack said.

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