The USS John C. Stennis, USS Nimitz and USS Bonhomme Richard strike groups steam through the Gulf of Oman. (AP)

Vienna, May 23 (Reuters): The UN nuclear watchdog said today Iran was flouting international demands and expanding a uranium enrichment programme the West suspects is aimed at nuclear arms production.

The findings in a report by the International Atomic Energy Agency (IAEA) came on the day nine US warships sailed into the Gulf to demonstrate American impatience with Tehran which it also accuses of backing insurgents in Iraq.

Iran’s defiance of another 60-day deadline for it to stop enrichment, set by the UN Security Council when it imposed a second set of sanctions on March 24, exposes Tehran to tougher penalties.

“Iran has not suspended its enrichment-related activities. Iran has continued with operation of its pilot fuel enrichment plant and with construction of its (planned industrial) enrichment plant,” said the report, obtained by Reuters.

Iran, which had already said it was expanding uranium enrichment, says it seeks to use nuclear technology only for power generation. Enriched uranium can be used for nuclear power plants or, if refined to a much higher degree, for bombs.

Six world powers stand behind UN Security Council resolutions demanding Iran suspend all nuclear fuel work in exchange for negotiations on trade incentives, with the threat of escalating sanctions if Tehran keeps refusing.

In Washington, a White House spokesman called the report “a laundry list of Iran’s continued defiance of the international community and (it) shows that Iran’s leaders are only furthering the isolation of the Iranian people”.

US officials had said the powers would start drafting a third, harsher batch of sanctions if the deadline was flouted.

A spokesman for British Prime Minister Tony Blair said existing sanctions, which have begun to deter Western investment in Iran, had stirred debate there about the wisdom of total defiance. “We believe... a process of further tightening those sanctions will deliver further results.”

But a senior European diplomat at the Security Council said: “I don’t think we’ll rush at it”. He said he expected the council would await the outcome of high-level exploratory talks on the nuclear issue between the EU and Iran next week.