VIENNA (Reuters):

The United Nations nuclear watchdog said on Wednesday that Iran was expanding its uranium enrichment programme in defiance of international demands, opening the way to harsher sanctions against Tehran over fears it is seeking atom bombs.

The findings in a report by the International Atomic Energy Agency (IAEA) came on the day nine United States warships sailed into the Gulf for manoeuvres to demonstrate American impatience with Tehran, which it also accuses of backing insurgents in Iraq.

Iran ignored another 60-day deadline for it to freeze enrichment activity set by the United Nations Security Council when it imposed a second round of sanctions on March 24.

"Iran has not suspended its enrichment-related activities. Iran has continued with operation of its pilot fuel enrichment plant and with construction of its (planned industrial) enrichment plant," said the report, obtained by Reuters.

In response, Iran said it remained committed to the nuclear Non-Proliferation Treaty (NPT), which the West suspects it is violating by using a declared civilian nuclear programme as a facade for mastering the means to build warheads.

"Iran is still loyal to its commitment in carrying out the NPT," Iranian state television quoted chief nuclear negotiator Ali Larijani as saying.

Power generation

Iran, which had already said it was expanding uranium enrichment, says it seeks to use nuclear technology only for power generation. Enriched uranium can be used for nuclear power plants or, if refined to a much higher degree, for bombs.

Six world powers stand behind U.N. Security Council resolutions demanding Iran suspend all nuclear fuel work in exchange for negotiations on trade incentives, with the threat of escalating sanctions if Tehran keeps refusing.

U.S. Secretary of State Condoleezza Rice did not comment directly on the IAEA report, but said Iran appeared to be doing everything it could to isolate itself, pointing to two U.N. sanctions resolutions already passed against Tehran.