VIENNA (Reuters) - An apparent delay in Iran's building of a nuclear conversion plant suggests its stockpile of low-enriched uranium (LEU) gas will grow for a while longer, despite Tehran's deal with world powers to curb its disputed atomic activity.
Among other steps, Iran agreed under the six-month accord - which took effect on Monday - to limit its LEU reserve. The new plant is meant to achieve that by turning the material into oxide powder that is not suited for further processing into high-enriched - or bomb-grade - uranium.
Diplomats and experts said the matter was of no immediate concern since Iran's commitment concerned the size of the stockpile towards the end of the deal, in late July, giving it time both to complete the facility and convert enough material.
But one Vienna-based envoy said Iran's progress in building the conversion line would be closely watched as part of the implementation of its obligations under the accord with the United States, France, Russia, Germany, Britain and China.
"It will be a problem if the facility is not completed in the next few months," Mark Fitzpatrick, director of the non-proliferation programme at the International Institute for Strategic Studies (IISS) think-tank, said.
While Iran this week halted its most proliferation-sensitive work, enrichment to a fissile concentration of 20 percent, it is allowed under the interim agreement to continue producing uranium refined to up to 5 percent.
Iran says it is doing so to fuel a planned network of nuclear power plants, not to develop bombs as the West fears. Uranium must be enriched to a high degree - about 90 percent fissile purity - for a nuclear weapon.
The powers negotiated the ground-breaking deal with Iran to buy time for talks on a final settlement that would remove the risk of a new Middle East war over Iran's nuclear aspirations.
They focused initially on securing a halt to 20 percent enrichment as this represents a relatively short technical step from bomb-grade uranium. It would take much longer to reach that threshold from the 5 percent level.
"Although the immediate attention is focused on removing the stockpile of 20 percent enriched uranium, it is important not to forget about the much larger stockpile of 3-5 percent enriched uranium," Fitzpatrick said.
Experts say Iran potentially has enough LEU for a few nuclear weapons if refined much further. Limiting its overall enrichment capacity is expected be one of the thorniest issues in future negotiations.
Reflecting Western concern also about the lower-grade stockpile, the United States says Iran has undertaken to not increase it so that it is not larger in half a year's time than it is now.
A senior U.S. administration official said Iran would "convert all of the newly enriched uranium" into oxide and that the total remaining uranium gas would be less than 7,650 kg.
It had a stockpile of 7,154 kg in November - experts say this would be enough to yield 4-5 bombs - and is estimated to produce roughly 250 kg per month, meaning the stockpile will grow by that amount if there is no conversion to off-set it. The longer it takes to complete the plant, the more Iran will have to process to meet the target by the six-month deadline.
The U.N. nuclear watchdog confirmed on Monday that Iran had started carrying out its part of the agreement, enabling the European Union and the United States to ease some sanctions.
But the International Atomic Energy Agency (IAEA) also said Iran was continuing to construct the plant for converting the LEU gas, the Enriched UO2 Powder Plant (EUPP).
That pointed to a delay from a timetable cited by the U.N. agency in a November report, which said Iran had indicated that tests of the EUPP would start in early December, "immediately after which the facility would commence operation".
Herman Nackaerts, the head of the IAEA's non-proliferation inspectorate until mid 2013, said it appeared to be taking the Islamic Republic a "bit longer" than initially anticipated to complete the facility.
But he added that Iran had mastered the technology for converting uranium gas into oxide, suggesting it had the know-how for building such plants.
A diplomat familiar with the issue said he did not see the issue as posing any major risk and that "with sufficient equipment it should be reasonably easy" for Iran to complete the conversion process in time. Another diplomatic source suggested that the plant could be completed soon.
In the longer term, Western experts say, any final deal should scale back and set strict limits on Iran's enrichment programme to ensure that it would not be able to build a bomb without the outside world finding out in time.
However, it is no longer seen as realistic to expect that Iran halts all such activity, as demanded by a series of U.N. Security Council resolutions since 2006, they say.
"Obviously we would like, as an ideal arrangement, for Iran to have no enrichment capability and no stockpile," another U.S. official said.
The issue to be explored was whether there was some possible capability "that would be consistent with the assurances we need that Iran is not in a position to develop a nuclear weapon without the international community having a long lead time and notice in advance."
(Editing by Mark Heinrich)