TEHRAN - Iran will shift its production of higher grade uranium to an underground bunker and triple its production capacity, it said on Wednesday in a defiant response to accusations it is trying to produce atomic bombs.

"This year, under the supervision of the (International Atomic Energy) Agency, we will transfer 20 percent enrichment from the Natanz site to the Fordow site and we will increase the production capacity by three times," the head of Iran's atomic energy agency, Fereydoun Abbasi-Davani, told reporters after a cabinet meeting, the state broadcaster IRIB reported.

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Iran only disclosed the existence of the Fordow site, in a mountain bunker, in September 2009, after Western intelligence had detected it and said it was evidence of covert nuclear work.

The decision to move production there and increase output drew immediate condemnation from the West, which has imposed a series of sanctions on Iran to try to force it to halt enrichment -- a process that can make weapons material if done to a much higher level.

"This announcement is a provocation," the French Foreign Ministry said in a statement.

"It reinforces the international community's existing concerns over the intransigence of the Iranian authorities and their persistent violation of international law."

The European Union voiced deep concern as well, saying Tehran was increasing its defiance of the UN Security Council.

The 27-nation EU, in a statement read out by Hungary's ambassador at a board meeting of the IAEA, said it noted with "grave concern" Iran's lack of cooperation with the UN nuclear watchdog.

"We note with particular concern the announcement made only today by Iran that it will increase its capacity to enrich (uranium) to 20 percent, thereby further exacerbating its defiance of the United Nations Security Council."

Iran has always denied it is developing nuclear weapons and says it is enriching uranium for electricity production and medical applications.

But its decision last year to raise the level of enrichment from the 3.5 percent purity needed for normal power plant fuel to 20 percent worried countries that saw it as a significant step towards the 90 percent needed for bombs.

The Vienna-based IAEA, whose board was due to discuss Iran's nuclear program, probably later on Wednesday, said it had only learned of the plan from media reports.

"Iran has not yet informed the agency of any such decision," IAEA spokeswoman Gill Tudor said.

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