Iran announced new strides in its nuclear programme on Wednesday in a defiant blow to US and EU pressure to rein in its atomic activities, and amid signs of an increasingly vicious covert war with Israel over the issue.

The United States dismissed the claims of progress as "hyped" and said Tehran was in fact feeling the bite of international sanctions and coming under increasing pressure to return to the negotiating table.

Iranian President Mahmoud Ahmadinejad unveiled on state television what was described as Iran's first domestically produced, 20-percent enriched nuclear fuel for Tehran's research reactor.

He said 3,000 more centrifuges had been added to his country's uranium enrichment effort, and officials said new-generation, high-capacity centrifuges had been installed in Iran's Natanz facility.

And he ordered Iran to "go build" four more nuclear research reactors.

Iran's Atomic Energy Organisation chief Fereydoon Abbasi Davani also said that uranium exploration in Iran had been stepped up and a new yellowcake processing factory would be "pre-launched" sometime over the next 13 months.

In Washington, State Department spokeswoman Victoria Nuland was dismissive, telling reporters that the Iranians had for months been boasting of progress but were in fact "many, many months behind" their own calendars.

"We, frankly, don't see a lot new here. This is not big news. In fact, it seems to have been hyped," Nuland said.

But the developments did underline Tehran's determination to forge ahead with nuclear activities despite tough sanctions from the West -- and despite speculation that Israel or the United States could be months from launching military strikes against Iran.

Iran portrayed the advances as evidence it was only interested in peaceful nuclear goals, under the slogan "nuclear energy for all, nuclear weapons for none."

But the steps challenged four sets of UN sanctions and a raft of unilateral US and EU sanctions designed to halt a programme that the West fears masks a drive for atomic weapons.

Israel -- the Middle East's sole but undeclared nuclear power which feels its existence is threatened by a nuclear Iran -- is widely held to have been carrying out clandestine acts against its arch foe.

Those acts have included the murder of four Iranian scientists by unidentified motorbike assailants in the past two years and the deployment of a highly sophisticated computer virus, Stuxnet, which damaged many of Iran's centrifuges.

Israel has neither confirmed nor denied its involvement in those acts.

But it has accused Iran of targeting its diplomats in India, Georgia and Thailand this week after bomb attacks or plots uncovered in those countries.

One Israeli diplomat in New Delhi was gravely hurt when a bomb attached to her car blew up. In Bangkok, two Iranians were in custody, including one who lost both his legs to a bomb he tried to throw at police, and another was arrested after flying to Malaysia.

"Iran's terrorist activities have been exposed to everyone," Israeli Prime Minister Benjamin Netanyahu said. "Aggression like this, if it is not stopped, will end up in spreading."

Iran has denied any role in those incidents and has repeatedly said it is ready to resume talks with world powers that collapsed a year ago.

On Wednesday, it finally replied to a letter sent nearly four months ago by EU foreign policy chief Catherine Ashton proposing a return to talks.

"Iran welcomes the readiness of the P5+1 group to return to negotiations in order to take fundamental steps toward further cooperation," chief nuclear negotiator Saeed Jalili wrote in the letter, according to the official IRNA news agency.

The United States and Britain said they were considering Iran's response.

Thus far, Russia and China have stood by Iran, criticizing the Western sanctions on it as a barrier to the talks and refusing to comply with them.

But there were indications that the support could be weakening, at least in Moscow.

"We are concerned that the distance that separates Iran from the hypothetical possession of technologies to create nuclear weapons is contracting," Russian Deputy Foreign Minister Sergei Ryabkov said.

"The Iranian side is indeed making progress in its nuclear programme," he told the specialised journal Security Index.

The International Atomic Energy Agency, the UN's nuclear watchdog, is to send a high-level team back to Tehran next week to discuss suspicions Iran is working towards atomic weapons.

IAEA officials were last in Tehran at the end of January but their talks were inconclusive. As one diplomat at IAEA headquarters in Vienna said, the Iranians "quite cleverly stonewalled for three days."

Iran's economy is showing meanwhile the strains of the West's economic sanctions.

The rial has slumped against the dollar in black market trade, boosting costs for goods already victims of high inflation officially put at 21 percent and unofficially around 30 percent.

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