Iran has stoked Western fears about its nuclear ambitions with its enrichment of fissile material in a new site deep inside a virtually indestructible mountain bunker, analysts said Tuesday.

Iran says it is now enriching uranium to 20-percent purity at the new Fordo site near Qom to provide fuel for its Tehran Research Reactor to produce medical isotopes for the treatment of cancer patients.

But analysts say the Islamic republic, which insists its nuclear activities are peaceful, has more than enough enriched uranium for this purpose already.

"There is absolutely no civilian need for it," Mark Fitzpatrick, an expert on nuclear non-proliferation at the International Institute for Strategic Affairs in London and a former US State Department official, told AFP.

"Even if Iran could produce the fuel rods (for the research reactor), which they now say they can, they have enough of a stockpile to last five years."

The suspicion, therefore, is that Iran has another purpose in mind for the uranium: building an atomic bomb. A nuclear-armed Iran is an alarming prospect not just for the West but also for Israel and other nations in the region.

Iran already has considerable stockpiles of 3.5-percent uranium, but being able to enrich to 20 percent brings it significantly closer to the 90-percent level required for an atomic weapon.

The International Atomic Energy Agency has 24-hour surveillance cameras in the site and there are regular visits by its inspectors, Iran's envoy to the Vienna watchdog Ali Asghar Soltanieh was quoted as saying on Tuesday.

But the fear is that if Iran decided to expel IAEA inspectors, as North Korea did, it could enrich uranium to weapons-grade purity using the fortified Fordo facility in a short space of time.

Enriching uranium is one of three main areas needed to develop a nuclear arsenal. Iran would also need to make the enriched uranium weapons-ready in a warhead and manufacture a missile to carry it to target.

An IAEA report on November 8, the agency's hardest-hitting to date, expressed "serious concerns" that Iran was carrying out research in these areas.

Fordo "was originally a clandestine facility which was designed in the view of many experts for the production of ... HEU, highly-enriched uranium," Mark Hibbs from the Carnegie Endowment for International Peace think-tank told AFP.

"The configuration of the cascades in the facility is worrying because it would permit ... the production of highly-enriched uranium ... with very little efficiency loss," Hibbs said.

"Israel, which has already warned Iran that it could take military action against installations, is very, very worried by this facility ... We are moving into dangerous territory."

Although the world knew about Fordo before, the start of operations there comes at a time of particularly heightened tensions, amid Western moves towards tougher sanctions and Tehran's threats to close the Strait of Hormuz.

Western powers were "hoping that Russia and China would convince Iran not to do this," Hibbs said.

But analysts say that it is far from certain that Iran will go for broke and seek to develop a nuclear arsenal. Instead, it could be merely amassing the capability to do so in order to be in a stronger negotiating position.

Fordo "is another step that takes it closer to having a nuclear weapons facility, allowing it to produce weapons-grade uranium quickly and in sites difficult to destroy militarily," former IAEA official David Albright told AFP.

"They appear to have taken the decision to acquire a nuclear weapons capability, but not a decision to build the bomb. And that means that they can be dissuaded from doing that," said Albright, now at the Washington-based Institute for Science and International Security (ISIS).

"Because of the opaque nature of leadership in Iran and the lack of deep knowledge on how the leadership is thinking, this escalation could represent an effort by Iran to stake out a tough negotiating position," Hibbs said.

"If Iranians establish 'facts on the ground', they would be negotiating from a position of strength."

Fitzpatrick too suspects this might be the purpose.

"From Iran's perspective they probably see it as strengthening their leverage ... They think it buys them more."