Diplomats on Monday confirmed reports that Iran has begun uranium enrichment at a new underground bunker, and say the process is producing material that can be upgraded quickly for use in a nuclear weapon.

Two diplomats told The Associated Press that centrifuges at the site in Fordo, Iran, are churning out 20 percent uranium. That is higher than the 3.5 percent being produced at Iran's main enrichment plant and can be turned more easily into fissile warhead material.

The diplomats, speaking on condition of anonymity, said that 348 machines are operating at Fordo. They based their information on an inspection last week by the International Atomic Energy Agency.

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The diplomats’ remarks follow a report Sunday in the hardline Iranian daily Kayhan, which said operations at the bunker-like Fordo facility south of Tehran were small in comparison to Iran’s main enrichment site. However, the centrifuges at the underground labs are considered more efficient than others and are shielded from aerial surveillance and protected against airstrikes by up to 300 feet (90 meters) of mountain rock.

Uranium enrichment is at the core of the international standoff over Iran’s nuclear program. The U.S. and its allies fear Iran could use its enrichment facilities to develop high-grade nuclear material for warheads. Iran insists its nuclear program has only peaceful aims.

On Monday, Iran's Supreme Leader, Ayatollah Ali Khamenei, said the Iranian nation would not yield to the pressure of sanctions imposed by the West to force Iran to change its nuclear course.

"The Iranian nation believes in its rulers ... sanctions imposed on Iran by our enemies will not have any impact on our nation," he said in a speech broadcast by state TV. "Sanctions will not change our nation's determination."

Iran has recently increased its threats and military posturing in the face of growing pressure, including U.S. sanctions targeting Iran’s Central Bank aiming to complicate its ability to sell oil.

A senior commander of Iran’s Revolutionary Guard was recently quoted as saying Tehran’s leadership had decided to order the closure of the Strait of Hormuz, a strategic oil route, if the country’s petroleum exports are blocked. Revolutionary Guard ground forces also staged war games in eastern Iran in an apparent display of resolve against U.S. forces just beyond the border in Afghanistan.

Iranian officials have issued similar threats, but this is the strongest statement yet by a top commander in the security establishment.

“The supreme authorities ... have insisted that if enemies block the export of our oil, we won’t allow a drop of oil to pass through the Strait of Hormuz. This is the strategy of the Islamic Republic in countering such threats,” Revolutionary Guard Deputy Commander Ali Ashraf Nouri was quoted as saying by another newspaper, the Khorasan daily.

For the moment, however, U.S. officials are seeking stronger diplomatic and economic pressure on Iran rather than military action, although they have not yet ruled this out.

In an interview broadcast Sunday, U.S. Defense Secretary Leon Panetta said Iran was laying the groundwork for making nuclear weapons, but was not yet building a bomb. Panetta reiterated U.S. concerns about a unilateral strike by Israel against Iran’s nuclear facilities, saying the action could trigger Iranian retaliation against U.S. forces in the region.

“We have common cause here [with Israel], and the better approach is for us to work together,” he said.

Panetta’s remarks, on CBS’s “Face the Nation,” reflect the Obama administration’s long-held view that Iran is not yet committed to building a nuclear arsenal, only to creating the industrial and scientific capacity to allow one if its leaders decide to take that final step.

Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey, appearing with the defense secretary, said he wanted the Iranians to believe that a U.S. military strike could wipe out their nuclear program.

When asked whether the U.S. could destroy Iran's nuclear program if it chose to, Dempsey said, "I absolutely want them to believe that's the case."

Panetta also did not rule out launching a pre-emptive strike. "But the responsible thing to do right now is to keep putting diplomatic and economic pressure on them to force them to do the right thing," he said. "And to make sure that they do not make the decision to proceed with the development of a nuclear weapon."

Dempsey also said that Iran has the military power to block the Strait of Hormuz "for a period of time" if it decides to do so, but that the U.S. would take action to reopen the waterway. "We can defeat that," he said.

Panetta said closing the strait would draw a U.S. military response. "We made very clear that the United States will not tolerate the blocking of the Strait of Hormuz," he said. "That's another red line for us and ... we will respond to them."

A number of experts say Iran is unlikely to close the strait, through which Gulf oil flows, because the action could hurt Iran as much as the West.

Kayhan, affiliated with Iran’s ruling clerics, reported that Tehran has begun injecting uranium gas into sophisticated centrifuges at the Fordo facility, near the holy city of Qom.

“Kayhan received reports yesterday that show Iran has begun uranium enrichment at the Fordo facility amid heightened foreign enemy threats,” the newspaper said in a front-page report. Kayhan’s manager is a representative of Iran’s Supreme Leader, Ayatollah Ali Khamenei, who has the final word on all important matters of state.

Iran has a major uranium enrichment facility in Natanz in central Iran, where nearly 8,000 centrifuges are operating. Tehran began enrichment at Natanz in 2006.

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