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Credit: Reuters/Herwig Prammer By Fredrik Dahl VIENNA | Fri Sep 2, 2011 3:44pm EDT VIENNA (Reuters) - The watchdog International Atomic Energy Agency is "increasingly concerned" about possible work in Iran to develop a nuclear payload for a missile, the IAEA said in a confidential report obtained by Reuters on Friday. The U.N. nuclear agency report said it continued to receive new information adding to such worries. One diplomat familiar with the Iran probe said some information concerned activities allegedly carried out as recently as last year. The developments highlighted in the IAEA's latest quarterly inspection report are likely to fan Western suspicions about the underlying nature of Iran's nuclear activity, which Western powers suspect is aimed at developing atom bombs. It may provide additional arguments for the United States and its European allies to further tighten the sanctions pressure on Iran, one of the world's largest oil producers. Iran's envoy to the IAEA, Ali Asghar Soltanieh, dismissed what he called "baseless allegations" about Iran's program. But he nevertheless described the report as a step in the right direction, saying it showed that Iran had fully cooperated with the IAEA by allowing a senior nuclear inspector full access to atomic sites during a five-day visit last month. "This new trend of positive cooperation between Iran and the IAEA should continue," Soltanieh told Reuters. Western diplomats have dismissed Iran's attempt to show increased openness about its nuclear work, saying it is still failing to address core concerns about its aims. In addition to addressing the issue of alleged military dimensions to Iran's nuclear program, the U.N. agency said Tehran had begun installing machines for higher-grade uranium enrichment in an underground bunker near the holy city of Qom. Shifting enrichment activity to such a subterranean site could offer greater protection against any attacks by Israel or the United States, which have both said they do not rule out pre-emptive strikes to stop Iran getting nuclear weapons. At a separate research and development site, the Vienna-based IAEA said, Iran had started enriching uranium experimentally with a more advanced model of centrifuge than the erratic, 1970s vintage machine it has been using for years. NUCLEAR MISSILE WORK? "Iran has made progress on the enrichment side," the diplomat familiar with the IAEA's investigation said, adding the Islamic state was making a "lot of effort" to get the underground Fordow site up and running. Uranium enriched to a low level of fissile purity is suitable for running civilian nuclear power plants. If refined to a much higher degree, it forms the core of nuclear bombs. The report showed that Iran has now produced a total of more than 4.5 tonnes of low-enriched uranium since the activity began in 2007, an amount which experts say could provide material for at least two bombs if refined much more. Its output of higher-grade refined uranium had also risen. It was a further sign of Iran's determination to press ahead with enrichment in defiance of international demands that it desist from such work. For several years, the IAEA has been investigating Western intelligence reports indicating Iran has coordinated efforts to process uranium, test explosives at high altitude and revamp a ballistic missile cone to accommodate a nuclear warhead. The IAEA, tasked with ensuring that nuclear technology is not diverted for military aims, says Iran has not engaged with the agency in substance on these issues since 2008. The IAEA report said it was "increasingly concerned about the possible existence in Iran of past or current undisclosed nuclear-related activities involving military-related organizations, including activities related to the development of a nuclear payload for a missile, about which the agency continues to receive new information." It said the information was "extensive and comprehensive" and obtained from many member states and through its own efforts. Iran denies harboring any nuclear weapon ambitions, saying it wants to refine uranium only for electricity or isotopes for medicine and agriculture. But it has long restricted the access of IAEA inspectors, stoking concerns abroad. "I categorically reject this sort of allegation. I'm 100 percent sure (about Iran's) exclusively peaceful activities," Soltanieh said. (Reporting by Fredrik Dahl; Editing by Rosalind Russell) World Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (1) stephan1947 wrote: Shalom & Boker tov…From 1933-1945, the ‘allies’ deliberately and knowingly postured, while IBM (as Matthew Black’s research documents) provided the technology to identify, ghettoize, exterminate my people. The post-Shoah revisionism, that the ‘allies’ did not know about the slaughter of 6+ million Jews, is reprehensible…and a lie. It is now 2011. Iran, the 4th reich, is relentlessly building nuclear weapons…to exterminate Eretz Yisro’el. And the ‘allies’…tsk tsk among themselves, issue smarmy press releases, and do nothing. Unless there is a swift, thorough, carefully planned military obliteration of ALL of Iran genocide programme, then the horrific consequences are going to be on the heads of the ‘allies’. It disgusts me that Obama and the republicanazis, all bought by transnational cryptofascist corporations, are such cowards. STEPHAN PICKERING / Chofetz Chayim ben-Avraham Sep 02, 2011 3:58pm EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) 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