Iran will start feeding uranium gas into a second network of centrifuges within days, an Iranian news agency said on Wednesday, expanding a program which Western powers fear is intended to make atomic bombs.

The centrifuges can enrich uranium for making fuel for power plants or for nuclear bombs. Iran says it wants only to make electricity but has failed to convince world powers who are threatening United Nations sanctions.

Diplomats said on Monday that Tehran had begun "dry-testing" a second network, known as cascades, of 164 centrifuges to go with an initial cascade that yielded Iran's first batch of enriched uranium suitable for power plant fuel.

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The Iranian student news agency ISNA quoted a Tehran source confirming the second cascade had been installed two weeks ago at the Natanz pilot enrichment plant in central Iran.

It said the next important stage of work, injections of uranium UF-6 gas, would be done this week.

"Soon after injection of the gas, we will obtain the product of the second ... cascade," ISNA quoted the source as saying.

The first cascade of 164 centrifuges - cylindrical machines that create nuclear fuel by whirling at supersonic speeds - produced a tiny amount of low-enriched uranium in April.

Iran would need thousands of centrifuges spinning non stop for months to enrich uranium to the high level that would detonate a bomb. Experts say that could be 3-10 years away.

But Western powers fear Iranian advances could accelerate once Tehran has mastered a pilot program and worry that Iran may have clandestine operations unknown to UN inspectors.

"They need to feed the second cascade to test it operationally. But they have proved they can enrich to the benchmark 5 percent level for power plant fuel," said a senior diplomat close to the UN nuclear watchdog agency.

European powers pass draft on Iran sanctions to China, Russia
European powers have given Russia and China a draft resolution that would impose sanctions on Iran over its nuclear program, but Washington has not agreed to all its provisions, diplomats said on Wednesday.

The Bush administration, which received the draft earlier, wants the resolution to halt Russia's work at Iran's Bushehr nuclear power plant, the diplomats and U.S. officials in Washington said, speaking on condition of anonymity.

"Bushehr is a red line for the Russians," one UN Security Council member said on Wednesday. The plant in southwestern Iran is due to begin operation next year.

The current UN Security Council draft from the Europeans exempts "construction" of Bushehr and appears to allow some 1,500 Russians to continue working at the site, said one European diplomat.

The exemption does not extend to fuel deliveries, the diplomat said, meaning Russia would not be permitted to fuel the reactor, which it is contracted to do in 2007.

A unified front among Britain, France, Germany - lead negotiators with Iran - and the United States has been key to international efforts to curb Tehran's nuclear program, which the West says is aimed at making weapons and Iran says is for energy production.

The four wanted agreement with Russia and China before the resolution reached the full 15-member council. The United States, Britain, France, Russia and China are permanent council members with veto power while Germany is a key negotiator.

China's UN deputy ambassador, Liu Zhenmin, told reporters the draft had been sent to Beijing and that all six nations planned to meet on Thursday afternoon.

The resolution is expected to ban nuclear and missile technology transfers to Iran, according to diplomats in Vienna and Washington, who had seen the text.

The measure would also ban financial transactions abroad and a travel ban on Iranians involved in nuclear program, said the diplomats, who would not be named because the resolution had not been made public.

Nuclear-related technical assistance to Iran by the International Atomic Energy Agency, the UN nuclear watchdog, would be limited to "medical or humanitarian purposes" or "safety standards," according to the draft resolution.

The draft said nations had to "prevent the supply, sale or transfer" to Iran of "all items, materials, equipment, goods and technology which could contribute to Iran's nuclear and ballistic missile program."

It also said nations should "take the necessary measures to prevent the provision to Iran of technical assistance or training, financial assistance, investment brokering or other services and the transfer of financial resources or services related to Iran's nuclear or ballistic missile programs."

But the Bushehr reactor is still a problem although one U.S. official in Washington told Reuters he thought a compromise would emerge.

"It'll just be a matter of where you draw the line. Do you allow construction but not delivery of fuel? How do you work it?" said the official.