TEHRAN, (Reuters):

Iran has barred entry to 38 inspectors from the watchdog International Atomic Energy Agency (IAEA), after hardliners demanded retaliation for U.N. sanctions imposed on Tehran last month, officials said yesterday.

The IAEA confirmed Iranian word of the ban, but said this would not handicap its monitoring of a plant where Iran plans soon to expand from experimental into industrial-scale output of nuclear fuel in defiance of a U.N. Security Council resolution.

Iran's ISNA news agency said the move was a "first step" in limiting cooperation with the IAEA in line with a demand made by the hardline Parliament after the council agreed the sanctions.

Build atom bombs

The West accuses Iran of seeking to build atom bombs under the cover of a professed civilian nuclear energy programme, while Tehran insists it aims solely to generate electricity.

"Iran has decided not to give entry permission to 38 inspectors from the IAEA and has announced this limitation to the IAEA officially," the head of Parliament's Foreign Affairs and National Security Commission, Alaeddin Boroujerdi, said.

"The nationality of those who were barred is not the main basis for us," he told ISNA, without elaborating.

Iranian gove rnment officials were not available for comment. They had said earlier Tehran would continue basic cooperation with IAEA inspections and had no intention of quitting the nuclear Non-Proliferation Treaty (NPT) over the new sanctions.

"We are discussing with Iran its request for withdrawing the designation of certain safeguards inspectors," the IAEA said in a short statement issued by its Vienna headquarters.

INSPECTIONS INTACT, IAEA SAYS

"It should be noted however, that there are a sufficient number of inspectors designated for Iran and the IAEA is able to perform its inspection activities in accordance with Iran's Comprehensive Safeguards Agreement," it said.

"There may be some thought in Iran that this (ban) could be one of the things they could do that wouldn't really harm the inspection effort but still look dramatic and hardline (for domestic consumption)," said a diplomat familiar with the case.