Iran is believed to have told the U.N. atomic watchdog a broken pump is forcing it to remove fuel from its first nuclear power reactor, a new setback for the $1 billion (615 million pounds) project, experts familiar with the issue said on Monday.

They said it was a potentially significant problem likely to cause further delays for the Russian-built Bushehr plant, which has yet to start injecting power into Iran's national grid.

Iran has said Bushehr, first in a planned network of nuclear power plants, would start producing electricity early this year.

It says the plant is proof of the peaceful nature of its nuclear programme and that its uranium enrichment work is only meant to produce reactor fuel, rejecting Western accusations the Islamic Republic may be seeking to develop atomic bombs.

The International Atomic Energy Agency (IAEA) said in a report obtained by Reuters on Friday that Iran had told it that fuel assemblies would be removed from the core of the Bushehr reactor, just a few months after they were loaded.

The confidential IAEA document did not give a reason for the unusual action, which is expected to take place soon.

One independent expert said the problem apparently concerned an old back-up pump in the reactor.

I think what happened is that the pump failed but it didn't just fail, it broke up, so that ... there are pieces of metal that are now circulated throughout the primary cooling system, the expert told Reuters.

If not fixed, it could ultimately have led to a small radioactive leakage into the reactor's cooling water.

They are probably very happy it happened before it went critical (the plant starting to operate) because now they can inspect the fuel a lot more easily, the expert, who declined to be named due to the sensitivity of the issue, added.

WHY DID PUMP FAIL?

Bushehr was begun by Germany's Siemens in the 1970s, before Iran's Islamic revolution and has been dogged by delays. Fuel was loaded into the reactor four months ago but a January deadline for it to start producing electricity was missed.

Further woes could be an embarrassment not only to Iranian politicians who have made Bushehr the show-piece of Tehran's peaceful nuclear ambitions, but also for Russia which would like to export more of its nuclear know-how to emerging economies.

Mark Hibbs, a senior associate in the Nuclear Policy Programme of the Carnegie Endowment for International Peace, said that if it was a broken pump that was the problem, small bits of metal in the cooling water could damage the fuel rods.

If that happens, radioactive gases can escape from the fuel and into the coolant, Hibbs said. There has to be a cause analysis there to find out why the equipment failed.

Iran's nuclear envoy Ali Asghar Soltanieh told the ISNA news agency Russian engineers who built the plant on Iran's Gulf coast had advised that the fuel be unloaded for tests. The plant's head said it was being removed for safety reasons.

Ian Hore-Lacy, communications director at the World Nuclear Association, an industry body, said fuel removal was unusual but it may happen during the run-up to starting the reactor.

Fuel unloading, removal and replacement of core internals, checking, full inspection of fuel elements, and then re-loading could take about three weeks, he said in an email to Reuters.

Experts say that firing up the Bushehr plant will not take Iran any closer to building a nuclear bomb since Russia will supply the enriched uranium for the reactor and take away spent fuel that could be used to make weapons-grade plutonium.

Last month, a senior Russian official warned that the Stuxnet computer worm could have triggered a nuclear disaster on the scale of Chernobyl, referring to the 1986 nuclear accident at a plant in Ukraine, then part of the Soviet Union.

Many analysts believe Stuxnet was a cyber attack by the United States and Israel aimed at disabling Iran's nuclear equipment and slowing down a programme they suspect is aimed at making nuclear weapons, something Tehran denies.

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