A heavy-water nuclear plant in central Iran town has entered another phase of production despite UN demands that Teheran stop the activity, a top official announced Saturday.President Mahmoud Ahmadinejad inaugurated the "Arak" heavy-water plant, which Teheran says will be used for peaceful purposes. But the United States and European allies fear the heavy-water production also could eventually be used to produce plutonium for a nuclear bomb.The announcement comes days before Thursday's UN deadline for Iran to stop uranium enrichment - which also can be used to create nuclear weapons -or face economic and political sanctions.Teheran has called the UN Security Council resolution "illegal" and said it won't stop enrichment as a precondition to negotiations.Iran has been a building a nearby heavy-water reactor for two years, and it is not scheduled for completion until 2009.The heavy-water plant's top official, Manouchehr Madadi, said the facility now has the ability to produce up to 16 tons of heavy water a year - double the amount it previously produced.Mohammed Saeedi, the deputy head of the Atomic Energy Organization of Iran, said the facility is "one of the biggest nuclear projects" in the country, state-run television reported. He said the facility will be used in the pharmaceutical field and in diagnosing cancer.Nuclear weapons can be produced using either plutonium or highly enriched uranium as the explosive core. Either substance can be produced in the process of running a reactor.Reactors fueled by enriched uranium use regular - or "light" - water as a "moderator" in the chain reaction that produces energy. Reactors using "heavy water" contains a heavier hydrogen particle, which allow the reactor to run on natural uranium mined by Iran, foregoing the enrichment progress.But the spent fuel from a heavy-water reactor can be reprocessed to extract plutonium for use in a bomb.The West's main worry has been uranium enrichment. Iran on Tuesday responded to an incentives package presented by the five permanent members of the UN Security Council plus Germany aimed at getting Teheran to roll back its disputed nuclear program.Iran said it would be open to negotiations but did not agree to the West's key demand for Teheran to halt uranium enrichment as a precondition to talks.