IAEA report says 350 additional centrifuges were recently installed in the Fordo underground uranium enrichment facility • Iranians will be asked to explain why they are expanding enrichment capacity while attending nuclear talks in Baghdad.

A second round of talks between Iran and six Western countries, which began in Baghdad on Wednesday, has not resulted in any major breakthrough so far. The talks will continue on Thursday, but Western diplomats were not optimistic they would yield an agreement.

In a development that may prove to be a major setback in the talks, a report by the International Atomic Energy Agency, set to be released on Friday, is said to include information about Iran´s ongoing efforts to expand its uranium enrichment capability. Western diplomats told Reuters on Wednesday that since February Iran has installed 350 new centrifuges at the Fordo underground uranium enrichment facility near the city of Qom. Before the new centrifuges were installed, the facility already housed 700 centrifuges, which diplomats say were not operational.

According to diplomats, the Iranian delegation to the talks, the first round of which was held on April 14 in Istanbul, will be asked to explain why Iran is expanding its enrichment capacity while attending talks to resolve the crisis.

The termination of uranium enrichment at the Fordo facility is one of several demands the P5+1 powers (Security Council members the U.S., Russia, China, Britain, and France, plus Germany) have presented to the Iranians during the talks. The powers are also demanding that Iran stop enriching uranium to 20 percent. In return, Iran is being offered nuclear fuel for the development of medical isotopes at its nuclear research plant near Tehran.

Fordo, estimated to be buried beneath 80 meters (265 feet) of rock and soil, gives Iran better protection against any Israeli or U.S. military strikes and the shift of nuclear work to the site is of particular concern for the West.

The last IAEA report, published in February, said Iran had trebled its output of 20 percent uranium since late 2011 after starting up production at Fordo.

The new report is not expected to show Iran increasing production. But the installation of possibly hundreds more centrifuges could set the stage for that. Such machines spin at supersonic speed to raise the concentration of the fissile isotope of uranium.

Nuclear bombs require uranium enriched to 90 percent, but much of the effort required to get there is already achieved once it reaches 20%, shortening the time needed for any nuclear weapons "break-out".

Iran has steadily increased uranium enrichment since 2007, and now has enough of the 3.5 and 20% material for four bombs if refined further, experts say.

"The international community hasn´t done something wrong here. We haven´t created a suspicious nuclear weapons program that the world doesn´t know the answers to. Iran has," a senior U.S. official said early Thursday, after the grueling day of discussions that, at times, appeared on the verge of breaking down. "They are the party who has acted to create concerns in the international community."

Iran brought a potent bargaining chip to the table, tentatively agreeing on the eve of the negotiations to allow U.N. inspectors into the Parchin military complex southeast of Tehran, where the U.N. believes Iran ran nuclear explosive tests in 2003. Tehran says Parchin is not a nuclear site.