DUBAI (Reuters/AFP) - Iran said on Wednesday it had started installing a new generation of machines for enriching uranium, an announcement likely to annoy the West and complicate efforts to resolve a decade-old dispute over its nuclear program.

It came on the day the UN nuclear watchdog began talks in Tehran to try to advance a long-stalled investigation into suspected military dimensions of the program.

Iran had already told the International Atomic Energy Agency (IAEA) that it planned to introduce new IR2-m centrifuges to its main enrichment plant near the central town of Natanz - a step that could significantly speed up its accumulation of material that the West fears could be used to develop a nuclear weapon.

"From last month the installation of the new generation of these machines started," Fereydoun Abbasi-Davani, head of Iran's Atomic Energy Organisation, was quoted as saying by the Iranian Students' News Agency (ISNA). "We have produced the machines as planned and we are carrying out the installation gradually ... to complete the tests."

Enriched uranium can fuel nuclear power plants, Iran's stated aim, or, if refined to a high degree, provide material for bombs, which the West suspects is Tehran's real purpose, something Iran strenuously denies.

If deployed successfully, new-generation centrifuges could refine uranium several times faster than the model Iran now has. It was not clear how many of the new centrifuges Iran aimed to install at Natanz, which is designed for tens of thousands; an IAEA note to members implied it could be up to 3,000 or so.

Abbasi-Davani said the new machines were specifically for lower-grade enrichment of uranium to below 5 per cent purity.

Iran has been enriching some uranium up to a concentration of 20 per cent fissile material, only a short step from weapons grade, and it is this stockpile that has prompted Israel and the United States to warn that they will do whatever is necessary to prevent Iran being able to build a bomb.

The major world powers have imposed sanctions to try to press Tehran to give up nuclear activities with a possible military dimension, while Iran wants them to recognise what it sees as its right to refine uranium for peaceful purposes. The big powers' next talks with Iran are scheduled for February 26, although few expect any movement from Tehran before its presidential election in June.

Meanwhile, Inspectors from the International Atomic Energy Agency and an Iranian nuclear team led by Tehran's IAEA envoy Ali Asghar Soltanieh, began talks in the morning, the ISNA news agency reported.

President Mahmoud Ahmadinejad said that in Wednesday's negotiations Iran's rights to pursue peaceful nuclear technology had to be protected.

"It is certain that Iran's definite rights should be respected, as well as law, regulations and agreement between Iran and the agency," he told reporters on the sidelines of a cabinet meeting. The goal of the meeting in Tehran, the third of its kind in the past three months, is to "finalise the structured approach document", according to Herman Nackaerts, the IAEA's chief inspector who is leading the delegation to Tehran.

The document would "facilitate the resolution of the outstanding issues related to the possible military dimension of Iran's nuclear programme," Nackaerts told journalists at Vienna airport on Tuesday.

But "differences remain... we will work hard to try to resolve these differences," he said. "We will have good negotiations."

The Vienna-based agency says "overall, credible" evidence exist that until 2003 and possibly since Iran conducted nuclear weapons research.

Vehemently rejecting the charges, Iran has denied the IAEA broader access to sites, scientists and documents involved in these alleged military activities.