VIENNA - Iran has raised its potential capacity to make sensitive nuclear material by installing hundreds more uranium enrichment machines at an underground site, a UN watchdog report said, a day after world powers failed to convince Tehran to halt such activity.

The International Atomic Energy Agency also said on Friday satellite images show "extensive activities" at the Parchin military complex which inspectors want to check over suspicions that nuclear weapons-relevant research was done there.

The activities could hamper the IAEA's inquiry, it said - an allusion to what Western diplomats have said may be Iranian efforts to remove incriminating evidence. Iran has denied pursuing a clear weapons capability there or anywhere else.

Obtained by Reuters, the confidential report further said inspectors had found traces of uranium particles enriched to up to 27 percent at Iran's bunkered Fordow site, compared with the 20 percent level Tehran has officially reported to the IAEA.

Nuclear bombs require uranium enriched to 90 percent, but much of the effort required to get there is already achieved once it reaches 20 percent concentration, shortening the time needed for any nuclear weapons "break-out."

The report said Iran had told the UN agency that this higher-grade enrichment - taking Iran significantly further down the road to potential weapons-grade threshold - "may happen for technical reasons beyond the operator's control".

The quarterly report added that Iran had hooked up 368 new centrifuges in Fordow, a 50 percent increase in numbers, but that these were not yet being fed with material for enrichment.

Iran had increased its stockpile of higher-enriched uranium to around 145 kg in May from nearly 110 kg some three months ago, the report went on.

It said the IAEA had told Iran in a letter sent this month that it needed "early access" to Parchin. Iran has repeatedly refused this, maintaining that Parchin is a solely conventional military base beyond the writ of nuclear inspectors.

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The IAEA said it had urged Iran to expedite a final agreement to enable inspectors to resume their long-running investigation into suspected nuclear explosive experiments.

IAEA chief Yukiya Amano had said on Monday after talks in Tehran that the two sides were close to such a deal although "some differences" remained before it could be sealed.

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