Iran's announcement that it plans to build its first nuclear-powered submarine is stoking speculation it could serve as a pretext for the Islamic state to produce highly enriched uranium and move closer to potential atom bomb material.

Western experts doubt that Iran - which is under a U.N. arms embargo - has the capability any time soon to make the kind of sophisticated underwater vessel that only the world's most powerful states currently have.

But they say Iran could use the plan to justify more sensitive atomic activity, because nuclear submarines can be fuelled by uranium refined to a level that would also be suitable for the explosive core of a nuclear warhead.

"Such submarines often use HEU (highly enriched uranium)," former chief U.N. nuclear inspector Olli Heinonen said, adding Iran was unlikely to be able source the fuel abroad because of the international dispute over its nuclear programme.

It could then "cite the lack of foreign fuel suppliers as further justification for continuing on its uranium enrichment path", Heinonen, now at Harvard University's Belfer Center for Science and International Affairs, said.

Any move by Iran to enrich to a higher purity would alarm the United States and its allies, which suspect it is seeking to develop the capability to make nuclear bombs and want it to curb its nuclear programme. Tehran denies any atomic arms ambitions.

It would also likely further complicate diplomatic efforts to resolve the decade-old row over Tehran's nuclear programme and may add to fears of a military confrontation.

Several rounds of talks between Iran and six world powers this year have so far failed to make significant progress, especially over their demand that the Islamic Republic scale back its controversial enrichment work.

"Leverage"

"Iran is using this submarine announcement to create bargaining leverage," Shashank Joshi, a senior fellow and Middle East specialist at the Royal United Services Institute, said.

"It can negotiate away these 'plans' for concessions, or use the plans as a useful pretext for its enrichment activity."

Iranian deputy navy commander Abbas Zamini was last month quoted as saying that "preliminary steps in making an atomic submarine have started".

He did not say how such a vessel would be fuelled, but experts said it may require high-grade uranium.

Iran now refines uranium to reach a 3.5 per cent concentration of the fissile isotope U-235 - suitable for nuclear power plants - as well as 20 per cent, which it says is for a medical research reactor in Tehran.

Nuclear weapons need a fissile purity of 90 per cent, about the same level as is used to fuel U.S. nuclear submarines.

"This is a bald excuse to enrich uranium above 20 percent," Mark Fitzpatrick, director of the International Institute for Strategic Studies think-tank in London, said.

A Western diplomat agreed that it could provide another possible justification for making highly enriched uranium, adding Iran could also use medical isotope production as an excuse.

"What it all means to me is that they could enrich above 20 percent, or even just say they intend to, and then point to some or all of these 'justifications'," the envoy said.

Iran says its nuclear programme is for purely peaceful energy and medical purposes and that it is its right to process uranium for reactor fuel under the nuclear Non-Proliferation Treaty, a global pact to prevent the spread of atomic arms.

An Iranian lawmaker this week said parliament planned to ask the government to equip Iran's naval and research fleet with "non-fossil" engines, Press TV state television reported in an apparent reference to nuclear fuel.

While nuclear submarines generally run on highly refined uranium, merchant vessels can also operate on low-enriched fuel, Mark Hibbs of the Carnegie Endowment for International Peace said.

The six powers - the United States, France, Germany, Britain, China and Russia - want Iran to halt 20 percent enrichment. If Iran not only rejected this demand but also started enriching to even higher levels, it would risk dramatically raising the stakes in the dispute.

Costly subs

The United States and Israel have not ruled out military action to prevent Iran from obtaining nuclear weapons, sparking fears of a possible escalation into a new Middle East war.

The submarine statement and this week's missile tests by the Islamic Republic signalled Iranian defiance at a time when the West is stepping up the sanctions pressure on the major crude producer with a European Union oil embargo.

"I see this as an effort to demonstrate Iranian resolve at a time when sanctions are getting unprecedentedly tight," Joshi, of the Royal United Services Institute, said.

It is difficult and very expensive to make atomic submarines. "There is no way that Iran could build a nuclear-powered submarine," Fitzpatrick said.

Such submarines - which the United States, Russia, China, France and Britain have - can be at sea without refuelling and stay under water for much longer periods than those using diesel, experts said.

Naval reactors deliver a lot of power from a small volume and therefore run on highly enriched uranium but the level varies from 20 percent or less to as much as 93 percent in the latest U.S. submarines, the World Nuclear Association, a London-based industry body, said on its website.

Iran's announcement is another statement "that they are capable of producing the most-advanced and prestigious military technology and, as usual, there is little truth in what is being claimed", military expert Pieter Wezeman, of the Stockholm International Peace Research Institute think tank, said. – Reuters