TEHRAN - President Mahmoud Ahmadinejad says Iran wants to achieve industrial-scale uranium enrichment, setting his country on a collision course with the United States which fears Tehran wants to make an atomic bomb.

On Tuesday, Ahmadinejad said Iran had successfully produced the enriched uranium needed to make nuclear fuel for the first time, triggering a warning from Washington that Tehran's latest declared nuclear advance could heighten international pressure.

Iran's hard-line President Mahmoud Ahmadinejad speaks in Mashhad, Iran's holiest city Tuesday, April 11, 2006. [AP]

Ahmadinejad said in a televised address: "I am officially announcing that Iran has joined the group of those countries which have nuclear technology. This is the result of the Iranian nation's resistance."

"Based on international regulations, we will continue our path until we achieve production of industrial-scale enrichment," he told officials and some ambassadors from regional states gathered in the northeastern city of Mashhad.

The United Nations has said Iran must halt uranium enrichment, a process Western nations fear Tehran wants to master so that it can develop nuclear weapons. Tehran insists its aims are entirely peaceful.

White House spokesman Scott McClellan said that Iran's announcement could force further talks among the U.N. Security Council powers.

"If Iran continues to move in the direction that it is currently, then we will be talking about the way forward with the other members of the Security Council and Germany about how to address this going forward," he said.

The U.S. State Department said it was unable to confirm Iran's announcement, and some experts said that even if Tehran's assertions were accurate, it would still be years before the Islamic state was able to produce a nuclear weapon.

State Department spokesman Sean McCormack said the announcement gave "more weight to the international community to act in a concerted fashion", but some experts said it was unclear if Russia and China, veto-wielding members of the Security Council, would be willing to back sanctions.

DIALOGUE

China, which traditionally opposes slapping Iran with sanctions, urged a diplomatic solution.

"We still believe that negotiations and a diplomatic solution are the best way out of it," Wang Guangya, China's envoy to the United Nations, said in New York on Tuesday in comments carried by the official Xinhua news agency.

It was not immediately clear if Wang, who is also the current president of the Security Council, was speaking in direct reaction to Iran's announcement.

The Security Council has demanded Iran shelve enrichment activity, and on March 29 it asked the International Atomic Energy Agency to report on its compliance in 30 days.

IAEA chief Mohamed ElBaradei is expected to visit Iran later this week to seek full Iranian cooperation with the Council and IAEA inquiries. The announcement of advances in enrichment work casts an embarrassing cloud over that trip.

The IAEA had no immediate comment.

Iran, the world's fourth largest oil exporter, has one nuclear power plant under construction but has plans for more. It says it needs to make its own nuclear fuel to secure supply and has rejected U.N. demands to stop enrichment.

The high-profile announcement about Iran's nuclear achievements at a time when tensions with the West are already high, puzzled some analysts. But they said it could be grandstanding ahead of a possible softer approach to follow.

"They can say, 'we reached our rights, we reached our goals and it is not necessary to continue any more because we are able to do the job.' This is my guess," political analyst Saeed Laylaz said.

A Western diplomat said it was possible Iran was "putting on this drama to step back", but said this was still speculation. "It's totally the wrong signal," the diplomat added.

Reflecting anxiety about the nuclear dispute, investors shifted into the safe-haven Swiss franc after Iran's announcement, traders said. The nuclear dispute has also been a factor helping to push up oil prices to record levels.

The level of enrichment needed to trigger the nuclear chain reaction that detonates bombs is far higher than the 3.5 percent Iran says it has reached.

It would take Iran years to produce enough highly enriched uranium for one bomb with its current cascade of 164 centrifuges. But Iran has told the IAEA it will start installing 3,000 centrifuges later this year, enough to produce material for a warhead in a year.