Iran sets up 328 centrifuges at big atom site--sources

VIENNA, Feb 5 (Reuters) Iran has set up two cascades of 164 centrifuges each in its underground nuclear plant, laying a basis for full-scale enrichment of uranium and upping the stakes in a standoff with the West, European diplomats said today.

The cascades were to be vacuum-tested shortly, without uranium feedstock inside, and fuel material would then be added if the trial runs were successful, they said.

The 328 centrifuges would be the vanguard of 3,000 planned for installation in the coming months.

Iran recently finished installing piping, electrical cables and other equipment needed to begin so-called ''industrial-scale'' enrichment in the vast subterranean complex, which is fortified and ringed by anti-aircraft guns in the central Iranian desert.

Firing up the cascades would dramatically sharpen Iran's confrontation with Western powers that pushed through limited UN sanctions on Tehran six weeks ago to try to curb what they suspect is a disguised effort to assemble atomic bombs.

The Islamic Republic, the world's Number four oil producer, says it wants solely civilian atomic energy from uranium enrichment.

Diplomats said the launch of the first two cascades may be the gist of Iran's planned announcement of ''significant'' nuclear progress on February 11, when it crowns 10 days of celebrations marking the anniversary of its 1979 Islamic Revolution.

''Two cascades have been installed in the underground plant, but they are not running yet,'' said a European Union diplomat in Vienna, headquarters of the watchdog International Atomic Energy Agency (IAEA), which has inspectors at Natanz.

A diplomat from another EU country said the assembled cascades would be switched on shortly to run empty ''to test the vacuum for a few days and then, if that is successful, UF6 (uranium feedstock gas) will be added''.

''The Iranians appear to intend to have about six cascades (about 1,000 centrifuges) installed by the spring, and the rest of the 3,000 by around June,'' the first diplomat said.

Iran plans to rig up a total of 54,000 centrifuges at Natanz over the longer term.

There was no comment from Iran. On Friday, it denied reports abroad that it had begun installing the 3,000 centrifuges.

IAEA REPORT TO SECURITY COUNCIL PENDING The IAEA declined comment. Such confidential information would be wrapped into a report the IAEA must deliver to the U.N.

Security Council on February 21 on whether Iran has heeded a demand to stop enriching uranium.

If not, Iran faces the threat of broader sanctions.

Asked about the cascade reports, US State Department spokesman Sean McCormack told reporters: ''...If true, (it) would indicate that (the Iranians) continue down the pathway of isolation and non-cooperation with the international community, despite significant efforts on our part.'' Iranian media have repeatedly quoted hardline President Mahmoud Ahmadinejad as saying February 11 will be a day to ''prove the Iranian nation's obvious right'' to nuclear technology and that ''great achievements'' would be unveiled.

An intelligence source also said the two cascades were in place. ''Iran wants to convey that they are on the verge of industrial-scale enrichment and, 'We cannot be stopped any more - we are a nuclear power','' the source told Reuters. ''They are not there yet, but that's what they want the world to think.'' Three-thousand centrifuges going nonstop could purify enough uranium for one bomb within a year, assuming Iran wants one.

Tehran has run two pilot cascades of 164 centrifuges in a small research-level wing of Natanz for months, enriching token amounts of uranium but more often ''dry-spinning'' them.

But Iran has struggled to get centrifuges to spin smoothly in unison without overheating or vibrations for sustained periods -- the key to producing volumes of enriched uranium.

Analysts say that even if Iran has 3,000 on line in Natanz by June, no sure thing given a litany of previous delays, it may well need another year to iron out technical glitches and a further year to generate usable quantities of nuclear fuel.

So, IAEA chief Mohamed ElBaradei has said plenty of time remains for world powers and Iran to revive negotiations on a face-saving compromise which nuclear analysts and some diplomats say could entail capping Iran's programme short of ''industrial scale'' with trade benefits for Tehran in the bargain.

But a war of nerves between Iran and the West is worsening.

Washington has moved a second aircraft carrier group into the Gulf amid growing US talk of a pre-emptive strike on Iran, while Tehran has barred entry to 38 IAEA inspectors with Western nationality, among the 200 designated to work in the country.

Reuters SRS VP0158