Iran may be preparing to expand its nuclear programme at an underground plant near the city of Qom, a diplomat has revealed, just days ahead of a visit by United Nations nuclear inspectors.

The Vienna-based diplomat Iran told the BBC that Iran appears to be poised to install thousands of new centrifuges at the underground site in the northern city.

The centrifuges could speed up the production of enriched uranium, which can be used both for generating nuclear power and to manufacture atomic weapons.

Iran said on Wednesday it had installed another 3,000 centrifuges to increase its uranium enrichment abilities, but it was unclear whether these were the same as those mentioned by the diplomat.

Inspectors from the International Atomic Energy Agency, the UN's nuclear watchdog, are due to visit Tehran this week.

Iran insists that its nuclear drive is peaceful, but Western countries suspect the Islamic Republic of trying to develop an atomic bomb.

Iran has been hit with four sets of UN sanctions and a raft of unilateral US and European Union measures over its nuclear drive.

There has been speculation in recent weeks that Israel is preparing to mount a pre-emptive strike on the country's nuclear programme; however Israel has denied reaching such a decision.

Britain's Foreign Secretary William Hague warned yesterday that Iran's nuclear ambitions could spark an atomic arms race in the Middle East.

Mr Hague warned Israel today that military action against Iran would not be "a wise thing".

He insisted economic sanctions and negotiations had to be given "a real chance" to convince Iran to abandon its nuclear ambitions.

Meanwhile, Iran's oil ministry has said it has stopped selling crude to British and French companies

"Exporting crude to British and French companies has been stopped ... we will sell our oil to new customers," said spokesman Alireza Nikzad.

The EU in January decided to stop importing crude from Iran from 1 July.