VIENNA - The United Nations' nuclear watchdog is concerned that Iran's belated revelation of a new uranium enrichment site may mean it is hiding further nuclear activity, an agency report said on Monday.

The report said Iran had told the International Atomic Energy Agency that it had begun building the plant within a bunker beneath a mountain near the holy city of Qom in 2007, but the IAEA had evidence the project had begun in 2002.

Iran reported its existence to the IAEA in September after, Western diplomats said at the time, learning that U.S., French and British spy services had discovered it.

IAEA inspectors admitted on October 26-27 to the Fordow Fuel Enrichment Site found construction well advanced. Iran told the Vienna-based agency it would be started up in 2011.

The agency has indicated (to Iran) that its declaration of the new facility reduces the level of confidence in the absence of other nuclear facilities under construction and gives rise to questions about whether there were any other nuclear facilities not declared to the agency, the report said.

(The IAEA wrote to Iran on November 6) asking for a clear statement on whether they have similar facilities they have decided to build or are building, or have built. The IAEA has not got an explicit answer as of this morning, said a senior international official familiar with the inquiry.

Iran says the site, like the rest of its nuclear program, is meant only to yield fuel for civilian energy plants.

Diplomats say the site's small size makes it unsuitable for any purpose but to enrich lower quantities of uranium suitable for a bomb, and the IAEA said Iran still had a number of questions to answer about the site's chronology and purpose.

Iran told the IAEA the Fordow site was hatched as a fallback to preserve its declared civilian enrichment program if the far larger Natanz complex, under IAEA monitoring since 2002, was bombed by enemies such as Israel.

Western diplomats and nuclear experts say Fordow's planned capacity -- 3,000 centrifuges -- makes no sense as a stand-alone civilian enrichment center since it would be too small to fuel a nuclear power station around the clock. But it could make enough fissile material for one or two atomic bombs per year, they say.

CIVILIAN PURPOSE UNLIKELY

It goes without saying the Fordow site will not be able to cover the needs of (a power plant). With 3,000 machines, you'd need 9-10 installations of this size, said the senior international official, speaking on condition of anonymity.

One angle of IAEA checks into how the Fordow site could have been viable by itself was whether there was any hidden activity to convert uranium ore into feedstock for enrichment. Iran's Isfahan conversion center is under IAEA surveillance.

The report said Iran's failure to inform the agency of its decision to build or authorize construction of a sensitive nuclear facility as soon as the decision was made was inconsistent with its transparency obligations to the IAEA.

Iran's protracted cover-up of the site gravely underscored how the IAEA's knowledge of the scope and content of Iran's nuclear program has been diminishing due to restrictions on inspector movements, the senior international official said.

The report said Iran's failure to inform the agency of its decision to build or authorize construction of a sensitive nuclear facility as soon as the decision was made was inconsistent with its transparency obligations to the IAEA.

Iran's protracted cover-up of the site gravely underscored how the IAEA's knowledge of the scope and content of Iran's nuclear program has been diminishing due to restrictions on inspector movements, the senior international official said.

Iran's envoy to the IAEA said the report's findings were compatible with the information Tehran had given to the agency and that worries about the site were unfounded.

The report shows that all the fuss made about Fordow ... is totally baseless, Ali Asghar Soltanieh told Iranian news agency ISNA. Iran under no circumstances will abandon its peaceful nuclear facilities including enrichment work.

The IAEA report also said inspectors found Iran this month was enriching uranium with 650 fewer centrifuges -- 3,936 -- at Natanz than in August, although it had slightly raised the total number of installed machines, by some 350, to 8,692.

Western experts said Iran seemed to be holding back expansion of the scope of enrichment at Natanz, designed to house 55,000 centrifuges in all, to work out technical glitches in running thousands of centrifuges in unison non-stop without breakdown.

The report did not address the immediate focus of nuclear diplomacy with Iran, a confidence-building plan brokered by the IAEA in which Iran would send low-enriched uranium to Russia and France for conversion into fuel for a Tehran medical reactor.

It did say Iran had boosted its low-enriched uranium reserve to 1.76 tons from 1.5 tons in August, enough to yield 1-2 crude atomic devices if the material was refined to high purity.

World powers intend that confidence-building plan to be a precursor to talks to tackle their main worry -- the enrichment program as a whole due to its proliferation threat, given Iran's history of nuclear secrecy and impeding IAEA inquiries.

Iran has yet to give a clear answer on the plan, suggesting it wants amendments and more talks, rejected by Washington.

Russia Monday announced a new delay to Iran's first nuclear power station, saying technical issues would prevent its engineers from starting the Bushehr reactor by the end of 2010.

But diplomats say Russia uses Bushehr as a political lever in relations with Tehran, and Washington has been urging Russia to put pressure on Iran to rein in its enrichment program.

(Writing by Mark Heinrich and Kevin Liffey; additional reporting by Parisa Hafezi in Tehran, Katya Golubkova in Moscow and Andrew Quinn in Washington; Editing by Jon Hemming and Eric Beech)

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