A new U.N. nuclear agency report says Iran has expanded uranium enrichment, defying international demands to stop the sensitive nuclear work.

The International Atomic Energy Agency also says its ability to monitor Iran's nuclear program has deteriorated because of a lack of access.

The report sets the stage for more sanctions to be imposed on Iran.

The Security Council has given Iran until Thursday to stop enriching uranium - a process that can be used to make nuclear weapons.

Iran is already under limited U.N. sanctions for ignoring earlier Security Council resolutions.

Mohamed ElBaradei speaks to reporters (File)

The United States and its allies accuse Iran of trying to develop nuclear weapons under the guise of a civilian nuclear program. Iran denies the charge, saying its atomic program is intended to produce electricity.

On Tuesday, diplomats said the United States and some European allies plan to complain to IAEA chief Mohamed ElBaradei about his suggestion that Iran be allowed to keep some elements of its uranium enrichment program.

ElBaradei has said that Iran "pretty much has the knowledge about how to enrich." He added that the focus now should be on stopping Iran from going to industrial-scale production, rather than expecting it to stop all enrichment.

Some information for this report was provided by AFP, AP and Reuters.