IAEA Board of Governors, Vienna, Austria

A published report in a leading American newspaper says inspectors from the U.N. nuclear watchdog agency visited the Iranian underground nuclear facility at Natanz Sunday and found evidence suggesting Iran may have resolved most of its technological issues and has started enriching uranium on a significantly larger scale.

The report, in Tuesday's New York Times, cited top officials from the International Atomic Energy Agency. The paper says the examination was conducted with short notice, and the inspectors found Iranian engineers were already using some 1,300 centrifuges and were producing fuel that could be used in nuclear reactors.

A single centrifuge can only enrich a very small amount of uranium, so many are linked to form a chain, called a "cascade." When uranium is highly enriched, it can be used to form the explosive core of a nuclear weapon.

Andrew Grotto, senior national security analyst at the Washington-based Center for American Progress, says about 3,000 centrifuges are needed to produce enough highly enriched uranium to make one bomb a year.

"What is still unclear is how good Iran is at running these centrifuges for a long period of time, which is ultimately what you want if your goal is to produce a reliable supply of uranium."

Grotto says centrifuge technology is very complex. "They [centrifuges] are very delicate; they are hard to work with. Iran's made a lot of progress in the last six or seven years, but they still have a way to go before they are in a position to really produce uranium on a large scale and at a reliable pace," he said.

Iran denies accusations that it is seeking to secretly build nuclear weapons and says it is only pursuing nuclear energy for peaceful, civilian purposes.

Next week, the International Atomic Energy Agency is to report to the Security Council on Tehran's nuclear work, which could lead to further U.N. Security Council sanctions.

U.S. State Department Spokesman Tom Casey says the fact that Iran is moving forward in defiance of the international community's wishes and efforts proves the United States needs to move forward with its own policy.

"We need to continue to apply pressure, and in fact increase pressure, with an additional Security Council resolution if in fact they don't comply and don't change their mind," he said.

Security analyst Grotto says no one expects Iran to comply with Security Council demands to suspend uranium enrichment, and that a third round of sanctions are likely.

"People are already talking about the next round of sanctions. From what I hear from diplomats, the conversation is not about whether there will be a third resolution, but what the content of that resolution will be. So there will definitely be more Security Council action on Iran," he said.

But diplomatic efforts aimed at ending the nuclear standoff with Iran continue. Iranian media are reporting that European Union foreign policy chief Javier Solana will hold talks on May 31 with Iran's top nuclear negotiator.