WASHINGTON - Iran has finished installing centrifuges at a fortified underground facility and can sharply increase production of enriched uranium to a purity that can be quickly improved to weapons grade, the United Nations nuclear watchdog agency said on Friday.

According to the report by the International Atomic Energy Agency (IAEA), Iran has prepared 700 more centrifuges at the Fordow facility for operation since August, doubling the plant's enrichment capacity. If all of them produced 20 percent enriched uranium, which can be improved to bomb grade with relative ease, it would cut to about three months, down from six, the time needed to accumulate enough material for a nuclear bomb.

Iran insists its nuclear program is only for peaceful uses. But many nations fear it aims to acquire a bomb-making capability, and the five members of the U.N. Security Council plus Germany have made little headway in trying to persuade Iran to accept curbs on the effort.

The IAEA said Iran has expanded its stockpile of medium-enriched uranium by 43 kilograms since August, to a total of 233 kilograms, nearly enough to create fuel for a bomb. At the same time, Iran has diverted 96 kilograms of the total for use as civilian reactor fuel, which makes it harder to use the material for a bomb.

That leaves about 137 kilograms enriched to 20 percent. Experts say 200 to 250 kilograms are needed for a single bomb.

Israeli Defense Minister Ehud Barak said in October that Iran's diversion of fuel for the reactor indicated that it was moving more slowly toward bomb-making capability and had pushed back the "moment of truth" for its bomb program by 10 months or so.

The IAEA report, however, suggests Iran is not slowing its program but is poised to accelerate its output.

President Obama said at a news conference this week that a "window" remains for a diplomatic solution.

But he repeated his campaign vow that he will not allow Iran to obtain a bomb -- language used to convey a threat of war.