Nuclear deal alarms US

Russia's $800m (£513m) agreement to finish work on a nuclear power plant in southern Iran is fuelling new fears here that Tehran is bent on acquiring a nuclear-weapons capability and may be closer to its goal than the West has previously imagined.

Speaking in Israel, where he is on an official visit, William Perry, the US Defense Secretary, reiterated Washington's concern that Iran was seeking nuclear weapons. "To the extent that this [the Russian deal] might lead in that direction, we would be very much opposed to it," he said.

The Clinton Administration, which has made nuclear non-proliferation a top foreign-policy priority, has long considered Iran as one of the highest-risk countries in this field. Its strategy, to attempt to turn Iran into a pariah state, has been hurt by the nuclear deal with Moscow.

According to Iranian officials, the Russians will complete the first unit at the Bushehr complex on the Gulf coast within four years. Ordered by the late Shah, the plant's first 1300MW unit was, they say, 90 per cent built and 60 per cent equipped when work stopped before the 1980s war with Iraq. A second unit at Bushehr is reportedly half finished.

Announcement of the agreement by Iranian television comes immediately after Israeli and US officials told the New York Times they believed Iran was within "perhaps five years" of having nuclear arms.

These allegations were instantly denied in a statement from Iran's mission to the UN as a "dramatic, though not unusual, distortion of the facts", which asserted that Iran supported a nuclear-free zone in the Middle East.The Bushehr plant is solely for peaceful purposes, Tehran says.

Last year President Yeltsin gave a vague commitment to halt future arms sales to Iran, though existing contracts would be fulfilled. But arms are a vital source of foreign exchange for Moscow, all the more so because of the war in Chechnya, which is draining Russia's coffers and jeopardising billions of dollars of foreign aid commitments.