Iranian President Mahmoud Ahmadinejad announced Monday that his country was now capable of producing nuclear fuel on an 'industrial scale' in an expansion of the uranium enrichment program that the United Nations has demanded it halt.

But Ahmadinejad did not specify how many centrifuges were now operational as he spoke at a ceremony at the facility, marking the one-year anniversary of Iran's first success in enriching small amounts of uranium.

"With great honor, I declare that as of today our dear country has joined the nuclear club of nations and can produce nuclear fuel on an industrial scale," Ahmadinejad said.

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"Now we are entering the mass production of centrifuges and starting to launch industrial scale enrichment, another step toward the flourishing of Islamic Iran," Vice President Gholamreza Aghazadeh said earlier during the ceremony at Natanz.

Iran's chief nuclear negotiator Ali Larijani told reporters on Monday that Iran will be forced to review its membership of the nuclear Non-Proliferation Treaty if it faces further pressure over its atomic program.

"If they continue to pressure Iran over its peaceful nuclear activities we have no other choice but to follow parliament's order and review our membership of the NPT," Larijani said.

Asked if Iran had started injecting gas into 3,000 centrifuges to enrich uranium being set up at the Natanz atomic site, he said: "Yes we have injected gas." But he did not say how many of the 3,000 machines had been installed.

He did not elaborate, but it was the first confirmation that Iran had installed the larger set of centrifuges after months of saying it intends to do so. Until now, Iran was only known to have 328 centrifuges operating.

The announcement brought quick condemnation from the United States and Europe. In Washington, State Department spokesman Sean McCormack said "Iran's actions are the reason the UN Security Council and the UN nuclear watchdog don't believe Iran's assurances that their (nuclear) program is peaceful in nature."

"The move showed Iran was definitively going in the wrong direction," said the Foreign Ministry in Germany, which currently holds the presidency of the European Union.

The Vienna-based International Atomic Energy Agency, the UN nuclear watchdog, had no immediate comment on Monday's announcement.

U.S. experts said 3,000 centrifuges was enough to produce a nuclear weapon but added their skepticism over Iran's claims, saying they had strong doubts Iran really had the capability to operate so many devices, a highly complicated process.

"I don't believe they have 3,000 up and running in any reasonable sense," said Michael Levi, a nonproliferation expert at the Washington-based Council on Foreign Relations.

The UN has imposed limited sanctions on Iran until it suspends enrichment, a key process that can produce either fuel for a nuclear reactor or the basis of a warhead. The United States and its allies accuse Iran of seeking to build nuclear weapons, a claim Tehran denies.

The unveiling of new centrifuges at Natanz, in central Iran, would be a strong show of defiance toward the United Nations, which has vowed to ratchet up sanctions as long as Iran rejects an enrichment suspension. The Security Council has set a new deadline of late May for Tehran to do so.

Larijani said his country was willing to negotiate with the West and offer assurances that its program is peaceful. But he said the West must accept its nuclear program as a fact.

"We are ready to reach understanding with the Westerners through a corridor of real negotiations - in the current situation, in which Iran's nuclear activities have been concluded," state television quoted Larijani as saying.

"The understanding regards assuring the other party about the peacefulness of Iran's nuclear activities," he said. "But we do not give in our rights."

Diplomats from developing nations were attending Monday's celebrations at Natanz, but diplomats from European Union boycotted to protest Iran's refusal of the UN demands, said the Foreign Ministry in Germany, which currently holds the EU presidency.

Across Iran, school bells rang to mark the national day of nuclear energy. The government sent out SMS messages of congratulations for the occasion to millions of mobile phone users.

In Tehran, some 200 students formed a human chain at Iran's Atomic Energy Organization while chanting death to America and death to Britain. The students burnt flags of the U.S. and Britain.

On April 9, 2006, Iran announced it had first enriched uranium using an array of 164 centrifuges.

Iran has said its next step is to set up 3,000 centrifuges, but it is not clear where the project stands. In mid-January, the hard-line president had been expected to announce that installation of the 3,000 had begun, but he did not. Instead, Ahmadinejad said Iran will gradually announce its successes step by step.

There have been no announcements since, and it is not known how far along Iran is in setting up the larger centrifuge array.

Experts say the Natanz plant needs between 50,000 to 60,000 centrifuges to consistently produce fuel for a reactor or build a warhead.

In the enrichment process, uranium gas is pumped into a cascade of thousands of centrifuges, which spin the gas at supersonic speeds to purify it. Uranium enriched to a low level, at least 3 percent, can be used as fuel, while at a far higher level, more than 90 percent, it can be used to build a weapon.

Iran currently has two cascades of 164 centrifuges each operating at an aboveground portion of the Natanz facility in central Iran. The two cascades have produced small quantities of non-weapons grade enriched uranium, UN nuclear inspectors have said.

Two smaller assemblies are known to have been set up in a heavily protected underground portion of Natanz, and have been going through dry testing - without gas - since November, according to inspectors.