TEHRAN, Iran - Iran has begun uranium enrichment at a new underground site built to withstand possible airstrikes, a leading hard-line newspaper reported Sunday in another show of defiance against Western pressure to rein in Tehran's nuclear program.

The operations at the bunker-like facility south of Tehran, reported by the Kayhan daily newspaper, are small in comparison to Iran's main enrichment site. But the centrifuges at the underground labs are considered more efficient and are shielded from aerial surveillance and protected against airstrikes by up to 300 feet (90 metres) 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 — which claims it only seeks nuclear reactors for energy and research — has sharply increased its threats and military posturing against stronger pressures, including U.S. sanctions targeting Iran's Central Bank in attempts to complicate its ability to sell oil.

A senior commander of the Revolutionary Guard force was quoted as saying Tehran's leadership has 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 over 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.

The latest statements are certain to ramp up tensions with the U.S. and its allies, which are trying to increase pressure on Iran to punish it for its disputed nuclear program.

For the moment, however, U.S. officials are seeking stronger diplomatic and economic pressure on Iran rather than increasing threats of military action. A number of experts say Iran is unlikely to close the strait because that could hurt Iran as much as the West.

In an interview broadcast Sunday, U.S. Defence Secretary Leon Panetta said Iran is laying the groundwork for making nuclear weapons someday, but is 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, he said. "And the better approach is for us to work together."

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

The Kayhan newspaper, which is close to Iran's ruling clerics, said 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's nuclear chief, Fereidoun Abbasi, said Saturday that his country will "soon" begin enrichment at Fordo. It was impossible to immediately reconcile the two reports.

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.

Nouri said Iran's leadership has made a strategic decision to close the Strait of Hormuz should its exports be blocked. One-sixth of the world's oil flows to market through the strait, which is jointly controlled by Iran and Oman at the mouth of the Persian Gulf.

President Barack Obama approved new sanctions against Iran a week ago, targeting the central bank and its ability to sell petroleum abroad. The U.S. has delayed implementing the sanctions for at least six months, worried about sending the price of oil higher at a time when the global economy is struggling. But the new sanctions nevertheless prompted a series of threats from Iranian officials about closing the Strait of Hormuz.

The newspaper paraphrased Nouri as saying that a 10-day naval drill that ended Jan. 3 was preparation for such a closure. The Guard, which is Iran's most powerful military force and which has its own naval arm, has planned more sea manoeuvres for February.

Khamenei "determined a new strategy for the armed forces, by which any threat from enemies will be responded to with threats," Nouri said.

The U.S. and Israel have said that all options remain open, including military action, should Iran continue with its enrichment program.

Late Sunday, Iran's intelligence minister said several people have been arrested on suspicion of spying for the U.S. and plotting to disrupt Iran's parliamentary elections this year. He gave no further details.

Tehran says it needs the nuclear program to produce fuel for future reactors and medical radioisotopes needed for cancer patients.

The country has been enriching uranium to less than 5 per cent for years, but it began to further enrich part of its uranium stockpile to nearly 20 per cent as of February 2010, saying it needs the higher grade material to produce fuel for a Tehran reactor that makes medical radioisotopes for cancer patients. Weapons-grade uranium is usually about 90 per cent enriched.

Iran says the higher enrichment activities — to nearly 20 per cent — will be carried out at Fordo. These operations are of particular concern to the West because uranium at 20 per cent enrichment can be converted much more quickly for use in a nuclear warhead than uranium enriched to only 3.5 per cent.

Built next to a military complex, Fordo was long kept secret and was only acknowledged by Iran after it was identified by Western intelligence agencies in September 2009.

The facility is a hardened tunnel and is protected by air defence missile batteries and the Revolutionary Guard. The site is located about 20 miles (32 kilometres) north of Qom, the religious nerve centre of Iran's ruling system.

"The Fordo facility, like Natanz, has been designed and built underground. The enemy doesn't have the ability to damage it," the semiofficial Mehr news agency quoted nuclear chief Abbasi as saying Sunday.

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Murphy reported from Dubai, United Arab Emirates.