Iran starts underground nuclear work, condemns American to die

TEHRAN/VIENNA (Reuters) - Iranian and Western sources said on Monday Iran had switched on a uranium enrichment plant deep inside a mountain, a momentous step that aggravates Tehran's nuclear dispute with the West.
In a separate development that will infuriate Washington, Iran also announced that it had sentenced to death an Iranian-American dual citizen it arrested last month as a spy.

The moves come at a time when new U.S. sanctions imposed over Iran's nuclear program are causing real economic pain. Tehran has responded with threats to international shipping that have spooked oil markets. And a parliamentary election in two months is widening Iran's internal political divisions.
"The enrichment in Fordow has started," an Iranian official who asked not to be identified told Reuters. Two diplomats at the Vienna headquarters of the International Atomic Energy Agency, which has inspected the site, confirmed it.
Iran has long said it would begin enrichment of uranium at the site, deep under a mountain near the Shi'ite Muslim holy city of Qom, but some Western capitals may have hoped it could be persuaded to hold off to restart diplomacy to lift sanctions.
Enrichment is the most contentious part of Iran's nuclear program. Tehran says it intends to refine uranium to 20 percent purity for use in a peaceful medical research reactor, and that it has hidden nothing from the IAEA.
"All nuclear activities, including enrichment in Natanz and Fordow, are under continuous surveillance and control and safeguards of the IAEA," Iran's envoy to the IAEA, Ali Asghar Soltanieh, told Reuters in Vienna.
The West says uranium of 20 percent purity is not necessary for power plants and would be a big step towards the higher purity needed for a nuclear bomb. Western officials say Iran lacks the technology to process enriched uranium into a form suitable to running a medical research reactor.
Locating the enrichment complex inside a mountain makes it harder for Israel or the United States to destroy it. Both countries say military action remains a last resort option should diplomacy and sanctions fail to rein in Tehran.
Iran disclosed to the IAEA in 2009 that it was building the facility beneath a mountain at Fordow, but only after learning that it had been detected by Western intelligence.
"All of Iran's enrichment activity is in violation of (United Nations) Security Council resolutions and any expansion of its capacity at Fordow just compounds those violations," said a Western diplomat in Vienna.
"VIDEO GAME" SPY CASE

The death sentence for Amir Mirza Hekmati, 28, an Arizona-born former U.S. military translator, will further rile Washington, which denies he is a spy and has demanded his immediate release since his arrest last month. Iran has aired a televised confession - denounced by Washington - in which Hekmati said he worked for a New York-based video company designing games to manipulate public opinion in the Middle East on behalf of U.S. intelligence.
"Amir Mirza Hekmati was sentenced to death ... for cooperating with the hostile country America and spying for the CIA (Central Intelligence Agency)," ISNA news agency quoted judiciary spokesman Gholamhossein Mohseni-Ejei as saying.
"The court found him Corrupt on the Earth and Mohareb (one who wages war on God). Hekmati can appeal to the Supreme Court."
Hekmati's execution could still be blocked by Iran's highest court, which must confirm all death sentences.
His family says Hekmati was visiting grandparents in Iran when he was held. A spokesman for Mott Community College in Flint, Michigan, where Hekmati's father works, said the family would not be commenting on the sentence "because it's a very tricky diplomatic situation".
Washington says he has been denied access to Swiss diplomats, who represent U.S. interests in a country where it has had no mission since its embassy was stormed in 1979.
Hekmati previously worked as a U.S. military translator. Iran's Farsi language is one of the two main tongues spoken in Afghanistan, and the U.S. military often deploys Americans of Iranian origin there as translators.
Tehran, which imposes the death penalty frequently for crimes such as drug dealing and murder, is not known to have executed any U.S. citizen as a spy.
Three U.S. backpackers jailed in Iran as spies in 2009 were freed in 2010 and 2011 in what President Mahmoud Ahmadinejad called a humanitarian gesture. An Iranian-American sentenced to eight years for spying in 2009 was freed after 100 days.
Iran could "hold on to Hekmati and use him - as they have with previous foreign detainees - as a pawn in their rivalry with the United States, rather than execute him immediately and thereby raise tensions with the U.S. even more", said Gala Riani, an analyst at forecasting firm IHS Global Insight.
In a case apparently separate from that of Hekmati, Iran said on Monday it had broken up a U.S.-linked spy network that planned to "fuel unrest" ahead of the March parliamentary election.
"The detained spies were in contact with foreign countries through cyberspace," Intelligence Minister Haydar Moslehi was quoted by state television as saying. He gave no information about the nationalities and the number of those detained.
SANCTIONS TAKE TOLL
The long-simmering nuclear dispute has come to a boil in recent weeks, with the West imposing new sanctions that causing real pain to Iran's economy after years of measures that had little effect. U.S. President Barack Obama signed a new law on New Year's Eve that, if fully implemented, would prevent most countries from buying Iranian oil.
The European Union, which still buys about a fifth of Iran's oil, is poised to announce an embargo at the end of this month, and other countries may have to cut purchases of Iranian crude to receive waivers from the U.S. sanctions.
Buyers are demanding deep discounts to trade with Tehran, cutting the revenue that it needs to feed its 74 million people.
Iran has remained defiant. In a televised speech on Monday, Supreme Leader Ayatollah Ali Khamenei said: "Sanctions imposed on Iran by our enemies will not have any impact on our nation."
"The Iranian nation believes in its rulers."
The rial currency has plunged and Iranians have scrambled to withdraw savings from banks to buy dollars. The hardship comes just two months before the parliamentary election, Iran's first since a 2009 presidential vote whose disputed result triggered eight months of angry street demonstrations.
Iran's rulers put those protests down by force but, in the two years since, the Arab Spring has shown the vulnerability of authoritarian governments in the region to uprisings fuelled by public anger over economic difficulties.
Iran has responded to the new sanctions by threatening to shut the Strait of Hormuz, the outlet for ships carrying oil from the Gulf, guarded by a huge U.S.-led international fleet.
Brent Crude was trading at around $113 a barrel on Monday, up by about $6 in the nine days since Obama signed the new sanctions into law. Iran's military threats and sanctions news have caused spikes in the price throughout recent weeks.
Nuclear talks between Iran and global powers collapsed a year ago. Iran has said it wants to restart them, but the West says Tehran must first make clear it is willing to discuss a halt to uranium enrichment. Starting enrichment at the bunker could make it harder to revive talks and lift sanctions.
Diplomacy was made more difficult late last year when European countries withdrew their ambassadors after protesters stormed the British embassy in Tehran in November. France said on Monday its ambassador had returned.
(Additional reporting by Hossein Jaseb, Mitra Amiri and Ramin Mostafavi in Tehran and Christopher Wilson in Washington; Writing by Peter Graff; Editing by Mark Heinrich)