VIENNA: Iran is ready to sharply expand its uranium enrichment in an underground site after installing all the centrifuges it was built for, a U.N. nuclear report showed Friday, a development likely to fuel Western alarm over Tehran’s nuclear aims.

The Islamic state has put in place nearly 2,800 centrifuges that the Fordow enrichment site, buried deep inside a mountain, was designed for and could soon double the number of operating units to almost 1,400, according to the confidential International Atomic Energy Agency report obtained by Reuters.

Tehran has produced about 233 kg of higher-grade enriched uranium since 2010, an increase of 43 kg since August this year, according to the report issued in Vienna.

The Iranians have used 96 kg of the uranium refined to 20 percent of fissile purity for conversion into fuel for its medical research reactor in Tehran, the report said.

Such conversions make it harder for the material to be processed into 90 percent, or bomb-grade, enriched uranium and could be a step by Tehran meant in part to counter Western suspicions of a covert atomic bomb program.

But the IAEA report also said that “extensive activities” at the Parchin military compound – an allusion to suspected Iranian attempts to remove evidence – would seriously undermine an agency investigation into indications that research relevant to developing a nuclear explosive were conducted there.

The IAEA delivered its latest quarterly Iran report 10 days after U.S. President Barack Obama’s re-election raised hopes of a revival of nuclear diplomacy with Iran following speculation that Israel might bomb Iranian nuclear facilities.

Tehran denies U.S. and Israeli allegations that it is seeking a nuclear weapons capability, saying its program is entirely for peaceful energy. But U.N. inspectors suspect past, and possibly ongoing, military-related nuclear activity.

Obama this week said he believed there was still a “window of time” to find a peaceful resolution to the long standoff with Iran. But the IAEA report underlined the tough task facing Western powers pressing it to curb its nuclear program.

Fordow particularly worries the West as it is where Iran refines uranium to a fissile concentration of 20 percent.

Iran says it needs to do this to make fuel for the Tehran research reactor, but it also represents the major technical leap toward the level needed for nuclear weapons.

The fact that Fordow is buried deep underground also makes it less vulnerable to any airstrikes, which Israel has threatened if diplomacy fails to stop Iran acquiring the means to produce nuclear weapons.

The conversion of 20-percent uranium into fuel is reversible as long as it has not been introduced into a working reactor, but it would take a few months to turn it back into gas form.

This may explain why Israel, assumed to be the Middle East’s only nuclear-armed state, recently signaled that an attack on its archenemy’s nuclear sites was not imminent, after months of talk that it might be on the cards soon.

The question of when and how quickly Iran might be able to assemble an atom bomb if it chose to do so is hotly debated because it could influence any decision by Israel to take military action – a step many fear would blow up into a broader Middle East war.