"Today, the phase for installing 6,000 new centrifuges at the facility in Natanz has started," the state broadcaster's website quoted President Mahmoud Ahmadinejad as saying at the atomic plant.

His announcement came as Iran marked its "national day of nuclear technology" on the second anniversary of its first production of uranium sufficiently enriched to make atomic fuel.

Iran has already installed around 3,000 P1 centrifuges at an underground enrichment facility at Natanz, in central Iran, according to the UN nuclear watchdog. Tripling this number would mark a major expansion of its nuclear capacities.

The West fears Iran could use enriched uranium to make a nuclear weapon, and Tehran's refusal to suspend the process has been punished with three sets of UN Security Council sanctions and US pressure on its banking system.

Ahmadinejad's latest defiant announcement sparked swift statements of concern and warning from world powers.

White House spokesman Gordon Johndroe said that with such steps Iran "continues to isolate its people and risk further international financial and diplomatic sanctions."

The British Foreign Office said that by installing the new centrifuges Iran had "chosen to ignore the will of the international community" and was "making no effort to restore international confidence in its intentions."

French Foreign Minister Bernard Kouchner said the international community must consider "reinforced" sanctions if Iran does not respond to concerns about its nuclear programme.

But highlighting the divisions between world powers, Russian Foreign Minister Sergei Lavrov said that it was too early for new sanctions against Iran to be "on the agenda."

Ahmadinejad confirmed in an evening speech in Tehran that Iran was testing a new generation of more efficient centrifuges being built at an above-ground research facility at the plant.

These are Iran's version of the more efficient P2 centrifuges -- the IR-2 -- which Ahmadinejad said can enrich uranium with five times the output capacity of the standard P1s.

"Iran's (nuclear) victory is its major political battle in the contemporary era and is a prelude to major developments in international relations and the balance of power," he said.

Tehran has repeatedly insisted that it has no intention of making concessions over calls for it to freeze enrichment, leading to deadlock in the standoff with the international community.

The Chinese foreign ministry said on Tuesday that envoys from world powers would meet in Shanghai on April 16 to discuss how to end the standoff over the Iranian nuclear programme.

Iran insists that its nuclear programme is entirely peaceful and solely aimed at generating energy for a growing population whose supply of fossil fuels will eventually run out.

The United States has never ruled out military action against Tehran and Iran's arch enemy Israel has expressed alarm about the nuclear drive, especially after Ahmadinejad predicted the Jewish state is doomed to disappear.

Underlining the tensions, Israel's National Infrastructure Minister Benjamin Ben-Eliezer warned on Monday that Israel would respond to any Iranian attack by destroying the "Iranian nation."

The top US commander in Iraq David Petraeus in testimony to Congress on Tuesday also accused Iran of playing a "destructive" role in Iraq by supporting Shiite militias in the country.

In a warning to Ahmadinejad's domestic rivals, Iran handed former nuclear negotiator Hossein Moussavian a two-year suspended jail sentence for "harming national security", his lawyer announced.

Moussavian was a leading nuclear negotiator in the moderate team that made a deal with EU countries to suspend enrichment during the presidency of reformist Mohammad Khatami until 2005.

earlier related report
Iran risks more sanctions over nuclear program: US
The United States on Tuesday warned Iran it risked further isolation and new international sanctions after refusing to comply with UN Security Council resolutions over its disputed nuclear program.

US Secretary of State Condoleezza Rice was skeptical about Iran's claim that it had started work to install 6,000 new centrifuges to enrich uranium at its main nuclear plan in Natanz.

"I can't substantiate the claims. There are always multiple claims coming out of Iran about progress on this, progress on that. I don't think the underlying situation has changed," Rice told reporters.

White House spokesman Gordon Johndroe also could not verify the Iranian statement quoting President Mahmoud Ahmadinejad, but said it was not surprising.

"The Iranian government continues to be in violation of multiple United Nations Security Council resolutions and with each step it takes it continues to isolate its people and risk further international financial and diplomatic sanctions," he said.

The announcement came as Iran marked its "national day of nuclear technology" on the second anniversary of its first production of uranium sufficiently enriched to make atomic fuel.

Iran has already installed around 3,000 P1 centrifuges at an underground enrichment facility at Natanz, in central Iran, according to the latest report by the UN nuclear watchdog. Tripling that number would mark a major expansion of its nuclear capacities.

The West fears Iran could use enriched uranium to make a nuclear weapon, and Tehran's refusal to suspend the process has been punished with three sets of UN Security Council sanctions resolutions and US pressure on its banking system.

McCormack said that, although Iran was benefiting from record high oil prices, the sanctions "exacerbate the effects" of the Iranian government's "mismanagement" of the economy.

"You have increasing rates of inflation there and the need for them to dip into some of their reserves in order to fund their budget and to fund the extravagant promises that Ahmadinejad has made to the population," he said.

The US government is hoping the sanctions will put increasing popular pressure on the Iranian leadership to change course.

McCormack said neither Washington nor the international community wanted "to cause any harm or hardship to the Iranian people, but they have a government that was making these choices on their behalf."

Though he did not see all of Ahmadinejad's charge that Washington used the September 11th attacks as a pretext to attack Afghanistan and Iraq, McCormack said: "We went into Afghanistan because that's where the attack originated."

As for invading Iraq, he replied: "I think we have talked about those at length and everybody understands very clearly what our reasons for doing that were."

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