The Security Council has demanded Iran shelve enrichment activity and on March 29 it asked the International Atomic Energy Agency to report on its compliance in 30 days.

IAEA chief Mohamed ElBaradei is expected to visit Iran later this week to seek full Iranian cooperation with the Council and IAEA inquiries. The announcement of advances in enrichment work casts an embarrassing cloud over that trip.

The IAEA had no immediate comment.

Iran, the world's fourth largest oil exporter, has one nuclear power plant under construction but has plans for more. It says it needs to make its own nuclear fuel to secure supply and has rejected U.N. demands to stop enrichment.

The high-profile announcement about Iran's nuclear achievements when tensions with the West are already high, puzzled some analysts. But they said it could be grandstanding ahead of a possible softer approach to follow.

"They can say, 'we reached our rights, we reached our goals and it is not necessary to continue any more because we are able to do the job.' This is my guess," political analyst Saeed Laylaz said.

A Western diplomat said it was possible Iran was "putting on this drama to step back," but said this was still speculation. "It's totally the wrong signal," the diplomat added.

Reflecting anxiety about the nuclear dispute, investors shifted into the safe-haven Swiss franc after Iran's announcement, traders said. The nuclear dispute has also been a factor helping to push up oil prices to record levels.

Shortly before Ahmadinejad spoke on Tuesday, influential former Iranian President Akbar Hashemi Rafsanjani told the Kuwaiti news agency KUNA that Iran was producing enriched uranium from a cascade of 164 centrifuges.

The IAEA referred Iran to the Council in February for failing to convince much of the international community that its nuclear work aims to generate only electricity.

The level of enrichment needed to trigger the nuclear chain reaction that detonates bombs is far higher than the 3.5 percent Iran says it reached. But even word that low-level enrichment is under way will be unacceptable to Western powers, diplomats say.

It would take Iran years to yield enough highly enriched uranium for one bomb with such a small cascade. But Iran has told the IAEA it will start installing 3,000 centrifuges later this year, enough to produce material for a warhead in a year.