A US intelligence assessment predicted that Iran would increase uranium enrichment to 60 per cent purity in the event of a setback in nuclear talks, such as the absence of sanctions relief.
The 27-page report by the Office of the Director of National Intelligence examines threats the US faces around the world.
It warned such a move by Iran would bring it a step closer to the 90 per cent threshold needed for uranium to be used in a nuclear weapon.
"If Tehran does not receive sanctions relief, Iranian officials probably will consider options ranging from further enriching uranium up to 60 percent to designing and building a new 40 megawatt heavy water reactor," the report said.
The report's authors added that Iran may not yet be taking follow on steps that would lead to a deployable nuclear weapon.
"We continue to assess that Iran is not currently undertaking the key nuclear weapons-development activities that we judge would be necessary to produce a nuclear device."
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Iranian President Hassan Rouhani, right, and the head of Atomic Energy Organization of Iran Ali Akbar Salehi inspect the nuclear technology on the occasion of Iran National Nuclear Technology Day in Tehran in 2019. EPA -
IR-8 centrifuges at Natanz nuclear power plant, some 300 kilometres south of capital Tehran. AFP -
The Iranian nuclear power plant in Bushehr in 2010. EPA -
Salehi speaks with media while visiting Natanz enrichment facility, in central Iran in 2019. Atomic Energy Organization of Iran via AP -
The gate of Natanz nuclear power plant in Natanz , Isfahan province, in 2019. EPA -
Inside of the Iran's Fordow nuclear facility, in Fordow, Qom province in 2019. EPA -
Technicians work at the Arak heavy water reactor's secondary circuit, as officials and media visit the site, near Arak, Iran in 2019. Atomic Energy Organization of Iran via AP -
Members of the media and officials tour the water nuclear reactor at Arak in 2019. WANA via Reuters -
Concrete is poured for the base of the second nuclear power reactor at Bushehr plant in 2019. Atomic Energy Organization of Iran via AP
Iran's announcement Tuesday came two days after an explosion at its key nuclear facility in Natanz, which it blamed on arch-enemy Israel.
The 2015 nuclear agreement among Iran and major world powers calls for Iran to modify its heavy water reactor in Arak, which is under international control, so that it cannot produce military-grade plutonium.
North Korea nuclear tests
North Korea could resume nuclear tests this year as a way to force President Joe Biden's administration to enter into dialogue, the report also warns.
"North Korean leader Kim Jong Un may take a number of aggressive and potentially destabilising actions to reshape the regional security environment and drive wedges between the United States and its allies – up to and including the resumption of nuclear weapons and intercontinental ballistic missile (ICBM) testing," it said.
"We assess that Kim views nuclear weapons as the ultimate deterrent against foreign intervention and believes that over time he will gain international acceptance and respect as a nuclear power," the report states.
North Korea has not tested a long-range missile in more than three years, and has left the door open to talks with the US on denuclearising the Korean peninsula.
But the report said "Kim may be considering whether to resume long-range missile or nuclear testing this year to try to force the United States to deal with him on Pyongyang's terms."
