The IAEA, the U.N. nuclear watchdog, revealed that Iran has installed hundreds of centrifuges -- used to enrich uranium -- in an underground enrichment plant and hopes to have thousands more ready by May.
On Dec. 23, the U.N. Security Council gave Tehran an ultimatum to freeze its enrichment program within 60 days, but the Iranians continued to dismiss the order.
"Iran considers the (IAEA demand for) suspension as against its rights, the Nuclear Non-proliferation Treaty and international regulations," said Mohammed Saeedi, the deputy head of Iran's Atomic Energy Organization, to the official Islamic Republic News Agency.
Iran maintains that it is only seeking to develop nuclear-powered electricity, not nuclear weapons, but its refusal to allow the United Nations to monitor any enrichment activity makes officials wary.
"[I am] deeply concerned ... that the Iranian government did not meet the [Wednesday] deadline set by the Security Council," U.N. Secretary-General Ban Ki-moon told reporters in Vienna.
Iran faces possible increased sanctions from the U.N. Security Council, which could further isolate the country from the West.
The United Nations is expected to start developing a resolution next week to ratchet up pressure on the Iranians to suspend their program, a Security Council diplomat told the New York Times on Thursday.
U.S. Secretary of State Condoleezza Rice, traveling in Europe this week, convened a strategy meeting on Thursday with European Union and Russian officials to discuss action against Iran.
"We reconfirmed we will use available channels and the Security Council to try to achieve [negotiations]," she told reporters about the meeting. "The best course would be for Iran to suspend its enrichment and reprocessing activities so that we can return to negotiations."
But Iran maintains it will not accept immobilization of its nuclear program as a stipulation for negotiations.