By Fredrik Dahl

TEHRAN, April 20 (Reuters) - Iran will need a few more years before it can manufacture enough nuclear fuel to supply its planned power plants, the country's top atomic official said in remarks published on Friday.

The comments were the latest from Tehran about progress in its nuclear programme. Western powers suspect Iran is running a covert atom bomb project and U.N. sanctions have been imposed on Iran for refusing to stop its efforts to enrich uranium.

Iran says it only aims to generate electricity to allow it to export more of its oil and gas resources.

Last week, President Mahmoud Ahmadinejad raised the stakes in the standoff with the West by announcing Iran had begun "industrial-scale" nuclear fuel production, marking a shift from limited experimental enrichment it had been conducting.

Gholamreza Aghazadeh, head of Iran's Atomic Energy Organisation, clarified that Iran was not yet able to produce fuel in significant amounts.

"We have entered industrial scale but ..., for achieving a big industrial unit so that we can provide fuel for our power plants, definitely a few years are needed," he told the official Iranian news agency IRNA.

"Centrifuges are continuously being installed and production is increasing," he said, referring to enrichment machines.

Iran told U.N. nuclear inspectors this week that more than 1,300 of 3,000 centrifuges planned for start-up by end of May had been hooked up and that it had begun feeding "UF6" uranium gas into them.

Diplomats familiar with the inspectors' findings said the operation was still on a very small scale to test the durability of the centrifuges, not to stockpile enriched uranium.

Aghazadeh made clear more time was needed to build enough centrifuges to make meaningful amounts of nuclear fuel. The tubular devices are used to refine fuel for power plants or, if it is enriched to high levels, nuclear explosives.

Three-thousand centrifuges could be enough to refine uranium for one bomb within a year, if the machines run for long periods without breakdown, but Iran has failed so far to achieve such proficiency, Western analysts say.

Earlier this week, Aghazadeh reiterated Iran's longer term target of having 50,000 centrifuges at Natanz in Iran's central desert, saying it could take two to four years.

"When 50,000 have been installed then we can say we are able to produce fuel for one or two power plants," he said on Friday.

Underscoring Iran's resolve to push on despite sanctions, he said a plant had been set up in the town of Isfahan to make nuclear fuel sheaths for use at the Arak heavy water reactor, under construction and due to be launched in 2009.

Analysts say Iran has used announcements of atomic progress to strengthen its bargaining position with the West and to gloss over the technical glitches that have dogged its atomic activity.

AlertNet news is provided by