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Iran expects to start installing thousands of centrifuges in an underground facility next month, the head of the U.N. nuclear watchdog agency said Friday. The installation would pave the way to large-scale uranium enrichment, a potential way of making nuclear weapons.

On the sidelines of the World Economic Forum, Mohamed ElBaradei said: "I understand that they are going to announce that they are going to build up their 3,000 centrifuge facility ... sometime next month."

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He did not elaborate. But U.N. officials, who demanded anonymity because the information was confidential, emphasized that Iran had not officially said it would embark on the assembly of what will initially be 3,000 centrifuges at Natanz. But they said senior officials have informally told the International Atomic Energy Agency the work would begin next month.

Iran ultimately plans to expand its enrichment program to 54,000 centrifuges, which spin uranium gas into enriched material to produce nuclear fuel. That would give it the capacity to produce dozens of nuclear warheads a year, if it chose to develop weapons.

Diplomats briefed on the IAEA's latest findings said earlier this month the Iranians recently finished all pre-assembly work at their Natanz facility, which is underground as protection against attack. And senior Iranian officials have repeatedly said recently that large-scale installation work at Natanz would begin soon.

But the comments by the U.N. officials were the first independent confirmation that the Iranians had informed the IAEA — the U.N. nuclear monitor — of such plans, even if informally.

The only known assembled cascades for now are above ground at Natanz, consisting of two linked chains of 164 machines each and two smaller setups.

The two larger cascades have been running only sporadically to produce small quantities of non-weapons grade enriched uranium, while the smaller assemblies have been underground "dry testing" since late November, IAEA inspectors have reported.

That has led to speculation that Iran was hesitant to provoke U.N. Security Council sanctions harsher than the relatively mild penalties agreed on last month in response to Tehran's refusal to heed a council deadline to suspend enrichment. Or, they said, it could be a sign of headway by relative moderates in the leadership unhappy with President Mahmoud Ahmadinejad's confrontational manner.

Any start of underground installations at Natanz, however, would sharply escalate the conflict between Tehran and world powers over its refusal to suspend enrichment.