Iran, in a fresh rebuff of demands that it abandon its nuclear ambitions, has decided to process a large quantity of uranium into a precursor ingredient used in making both commercial nuclear fuel and nuclear weapons, the U.N. atomic watchdog agency said yesterday.

The International Atomic Energy Agency, in a confidential report, said Iran intends to convert more than 40 tons of uranium into uranium hexafluoride (UF6) gas, an intermediate step in the complex process of making enriched uranium. The plan, if carried out, would represent a significant step forward for Iran's nuclear program and -- in the view of Bush administration officials -- a growing threat. In theory, that much uranium could yield as many as five crude nuclear bombs.

Administration officials reacted strongly to the revelation, vowing to launch a new effort this month to bring Iran before the U.N. Security Council for international censure. "The United States will continue to urge others . . . to join us in the effort to deal with the Iranian threat to international peace and security," said John R. Bolton, the undersecretary of state for arms control and international security.

Iran emphatically denies seeking nuclear weapons, but it insists it will assert its legal right to develop a commercial nuclear power industry. Although international inspectors have found no hard evidence linking the Islamic state to a nuclear weapons program, Iran's credibility has been battered by numerous disclosures of past Iranian attempts to conceal sensitive nuclear research.

Iran has also angered key U.S. allies in Europe by backing away from commitments to freeze components of its nuclear program, including the production of centrifuge machines used in enriching uranium. In an agreement reached last fall with Britain, France and Germany, Iran promised to suspend the production of enriched uranium in return for trade and technical assistance.

Iran's decision to begin the conversion of 37 tonnes (40.7 tons) of raw yellowcake uranium into UF6 is seen by U.S. officials and many weapons experts as a further flouting of Iran's commitments. Several experts described the quantity as surprising and disturbing.

The revelation was contained in an IAEA report that otherwise contained much favorable news for the Islamic republic. The document -- one in a series of periodic updates on the findings of a U.N. investigation of Iran's nuclear program -- gave the Iranians high marks for cooperating with international inspectors. Unlike past reports, it featured no bombshells about past Iranian nuclear activity. It concluded that Iran had "plausibly" explained the existence of some particles of enriched uranium found in several of Iran's nuclear facilities -- particles that now appear to have entered the country on contaminated equipment purchased on the black market.

With the new report, the Bush administration faces diminishing prospects for finding "smoking gun" evidence of an Iranian nuclear weapons program -- and also, perhaps, for rounding up international support for tough action against Iran, said Jon Wolfsthal, deputy director for nonproliferation studies at the Carnegie Institute for International Peace. "Iran has answered the questions about its past while moving ahead with its enrichment program -- and we don't have a process in place to convince them to give it up," Wolfsthal said. "There's an open stretch of highway leading up to nuclear capability for Iran, and not a roadblock in sight."