A signatory to nuclear non-proliferation pacts, Iran insists its programme is purely peaceful and has invited U.N. inspectors to verify its nuclear facilities later this month.

In Washington, U.S. State Department spokesman Richard Boucher said: "We continue to have very grave concerns that Iran is using its supposedly peaceful nuclear programme...as a pretext for advancing a nuclear weapons programme.

"Iran's ambitious and costly pursuit of a complete nuclear fuel cycle only makes sense if it's in support of a nuclear weapons programme," he told a daily briefing.

Uranium must be enriched to be used, either slightly enriched for nuclear fuel or heavily enriched for a bomb.

U.N. and European Union officials called on Iran to sign a tough protocol to allow more thorough inspection by the U.N.'s nuclear watchdog, the Vienna-based International Atomic Energy Agency (IAEA), with little prior warning.

The other two members of Washington's "axis of evil" are Iraq - which the United States is preparing to attack if it does not demonstrably rid itself of alleged chemical, biological and nuclear arms programmes - and North Korea, which has resumed production of plutonium that could be used for weapons manufacture in defiance of the international community.

RUSSIAN HELP

Iran's first operational reactor is being built with Russian help in the southern port of Bushehr and is due to come onstream by early 2004. The United States has long insisted that Iran wants to use the plant to develop nuclear weapons.

Iran has said it is studying the feasibility of building several more reactors to meet the booming electricity demand of its 65 million people.

President Mohammad Khatami said on Sunday that Iran possessed uranium ore reserves and had begun mining operations in the Savand area, 200 km (125 miles) from the central city of Yazd.

Iran intended to control the whole fuel cycle, from mining and enriching uranium to managing spent fuel.

"If we need to produce electricity from our nuclear power plants, we need to complete the circle from discovering uranium to managing remaining spent fuel," he said.

IAEA chief Mohamed ElBaradei, involved in efforts to track down suspected nuclear weapons programmes in Iraq, greeted the news from Tehran cautiously.

He noted Iran had expressed its commitment to a civilian nuclear programme, and added at Athens airport: "I would like to work closely with them to enable them to demonstrate their commitment to a peaceful programme."

Western diplomats linked the timing of Iran's announcement to the planned visit of an inspection team this month headed by ElBaradei.

"They're trying to display greater transparency ahead of ElBaradei's visit in an effort to prevent him coming out with a critical report," said one Western diplomat based in Tehran.