Meanwhile a Washington lobby group calling for regime change in Tehran divulged that Iran now has 5,000 centrifuge machines for installation at the Natanz nuclear facility.

"Ten thousand centrifuge machines are needed to produce enriched uranium," said Paul Leventhal, founding president of the Nuclear Control Institute and a member of the Iran Policy Committee. He added that low-grade uranium can be produced with 5,000 or even as few as 2,000 machines. The result of which would be enough to produce a nuclear bomb.

Iran's move is seen as defying international demands that it maintain a two-year moratorium on its nuclear program. Tuesday's move has produced stern reaction from the United States and Europe, particularly France, where President Jacques Chirac issued a strongly worded statement.

In his annual speech to France's ambassadors at the Elysee Palace, Chirac issued a severe ultimatum to Iran, warning that it would face censure by the U.N. Security Council if it refused to cooperate and did not reinstate a freeze on nuclear activities.

Chirac made it clear that he was losing patience with Iran.

"Today I call on the Iranian authorities to choose the path of cooperation and confidence by carefully examining this offer and resuming their commitment to suspend activities related to the production of fissile materials," Chirac said.

"There is room for dialogue and negotiation. We call on Iran's spirit of responsibility to restore cooperation and confidence, failing which the Security Council will have no choice but to take up the issue," said the French president.

France position regarding Iran's nuclear shenanigans is in line with Washington's thinking -- that Iran, with an unstable theocratic regime, must not be allowed to acquire nuclear weapons capability.

The next step, if Iran continues to refuse to allow inspectors from the U.N. nuclear watchdog agency, the International Atomic Energy Agency, access to all its facilities, will be to bring the issue before the U.N. Security Council. That could result in severe economic sanctions being imposed on Iran.

Iran insists that under the Nuclear Nonproliferation Treaty it has the right to pursue nuclear capability for peaceful means, which it says is what it intends to produce.

In Britain Foreign Secretary Jack Straw said Iran had breached IAEA resolutions. Echoing the French president, Straw said the international community was "running out of patience" with Tehran.

Alireza Jafarzadeh, president of Strategic Policy Consulting and a former Washington spokesman for Iran's parliament in exile, the National Council of Resistance of Iran said the dialogue between the EU-3 (Britain, France, Germany) with Iran "is dead."

Jafarzadeh said the "Iranian regime is rapidly building and installing centrifuge platforms in the underground cascade halls of the Natanz site."

"The Iranian regime has made a conscious decision to acquire and impose a complete nuclear fuel cycle on the world community, which the regime mockingly describes as "power diplomacy." The aim of Tehran's regime, says Jafarzahed, is to proceed "step-by-step, until the international community is faced with a fait accompli.

U.S. officials denounced Iran's move, calling it a step toward creating material for nuclear bombs. "The nuclear crisis with Iran is very fluid at the moment," said Leventhal. But what is clear is that Iran is "in violation of its November 2004 agreement with the EEU-33 to suspend all enrichment-related activities."

"All eyes are now focused on Natanz, said Leventhal.

The New York-based Eurasia Group, a research and consulting firm that focuses on global political risk, predicts that the nuclear standoff with Iran is the "greatest source of political risk in 2006."

Raymond Tanter, a former Senior National Security Counsel member in the Reagan administration stressed that Iran's "violation of international agreements spark an action-reaction process of escalating rhetoric and capabilities in the region...."

Tanter points to three options in dealing with Iran. The first option is diplomacy, which he favors over the others, but recent attempts at working on the diplomatic track have led nowhere.

"Iran is playing the game in such a way that time is on its side," Leventhal said. "Iran is buying time."

The second option is military air strikes: those are irrational for a number of reasons. First, learning from Iraq's past mistakes, Iran has dispersed it nuclear building and processing facilities to about 200 or 300 different sites across the country.

Those are well protected, almost entirely in deep underground facilities and are under the protection of the Revolutionary Guards. Second is that an outside attack on Iran will unite the people around the government. Third, the nefarious fallout effect that an attack on Iran by the U.S. and/or Israel will have on U.S. troops currently serving in Iraq.

The third option is regime change, which is what the Iran Policy Committee is advocating. Tanter and the IPC are trying to get the Bush administration to remove the Mujahedeen-e-Khalq, or MeK, off the U.S. State Department list of terrorist organizations.

The IPC claims the MeK is among the better equipped of the Iranian opposition groups both in terms of organization and intelligence. The MeK, which is frequently described as somewhat of a mixture of a cult encompassing Marxism and Islam is led by Mariam Rajavi, who is based near Paris.

A French diplomat who spoke to United Press International on condition of anonymity said Paris did not approve of the group's activities and eyed Mrs. Rajavi with suspicion. "This is why we had to put her in the hole (jail) for a while, let her know we are watching her," said the diplomat.

Analysts from the Eurasia Group consider Iran's desire to develop a nuclear fuel cycle will lead to a "standoff with Iran." They add: "It is highly probable that confrontation between the U.S./Israel and Iran will escalate during 2006."

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