A leading Pentagon-funded think tank has determined that Iran could be as little as a year away from producing its first nuclear bomb.

The report by the Washington-based Nuclear Nonproliferation Policy Education Center provided the harshest assessment yet of Iran's nuclear weapons program. The report, partly funded by the Pentagon, also reviewed U.S. responses to Iran's program, but ruled out a military strike.

On Tuesday, Iran said it has begun converting 37 tons of raw yellowcake uranium for enrichment by gas centrifuges, Middle East Newsline reported. U.S. officials said the announcement reflected Teheran's intention to accelerate its nuclear weapons program.

"Iran is now no more than 12 to 48 months from acquiring a nuclear bomb, lacks for nothing technologically or materially to produce it, and seems dead set on securing an option to do so," the report, released on Sept. 13, said.

The assessment by the center came only weeks after the intelligence communities in Israel and the United States concluded that Iran sustained a setback in its race to achieve nuclear capability. In August, Israel's intelligence community asserted that International Atomic Energy Agency inspections of Iranian nuclear facilities prompted a suspension of uranium enrichment and the transfer of such equipment from civilian to military bases.

Iranian engineers need between one to four years to develop nuclear warheads, the report said. The think tank said Iran has the equipment to produce nuclear weapons fuel, the expertise to assemble bombs and the missile delivery systems.

The study was drafted with the help of leading U.S. experts on Iran, the Middle East, and nuclear weapons. The experts warned that a nuclear Iran would increase its support for organizations deemed terrorist, boost the price of oil and spark an arms race in the region.

"With Hamas in decline, Iran has already been seen to be increasing its support to groups like Hizbullah in Israel and Lebanon who want to liberate Palestine from 'Israeli occupation,'" the report said. "Increasing this aid certainly would help Iran take the lead in the Islamic crusade to rid the region of Zionist and American forces and thereby become worthy of tribute and consideration by other Islamic states. Also, bolstering such terrorist activity would help Teheran deter Israel and the U.S. from striking it militarily."

The report said U.S. and allied policy-makers have been drafting plans to prevent Iran from acquiring nuclear weapons. The think tank said the two most widely-examined choices were to bomb or bribe Iran.

"Neither, however, is likely to succeed and could easily make matters worse," the report said. "Certainly, targeting Iran's nuclear facilities risks leaving other covert facilities and Iran's nuclear cadre of technicians untouched."

"As for eliminating Iran's nuclear capabilities militarily, the U.S. and Israel lack sufficient targeting intelligence to do this," the report added.

"As it is, Iran could have already hidden all it needs to reconstitute a bomb program assuming its known declared nuclear plants are hit."

Instead, the report recommended that the United States lead naval exercises throughout the Persian Gulf. The exercises should seek to improve allied capability to clear mines, protect merchant ships, seize nuclear cargo and ensure traffic in the Straits of Hormuz.

Another recommendation was that the United States offer missile defense systems to allies in the Middle East. The think tank warned that such an offer must ensure that recipient states could not use these systems for offensive purposes.

The study warned that a nuclear Iran would spark similar programs in a range of Middle East states. Algeria, Egypt, Iraq, Saudi Arabia, Syria and Turkey Ñ all signatories of the Nuclear Non-Proliferation Treaty Ñ were the most likely to seek nuclear weapons, the study said.

In early 2004, the report said, senior Saudi officials announced they were studying the possibility of acquiring nuclear weapons from China or Pakistan. At the same time, Egypt announced plans to develop a large nuclear desalinization plant and could have received sensitive nuclear technology from Libya.

"Egypt, Algeria, Syria, and Saudi Arabia will all claim that they too need to pursue nuclear research and development to the point of having nuclear weapons options and, as a further slap in Washington's face Ñ and Tel Aviv's Ñ will point to Iran's 'peaceful' nuclear program and Israel's undeclared nuclear weapons arsenal to help justify their own 'civil' nuclear activities," the report said.

The report said Israel's role was crucial to any U.S. response to a nuclear Iran. The think tank recommended that the United States and its allies Ñ prior to the Nuclear Non-Proliferation Treaty review conference in May 2005 Ñ persuade Israel to take unilateral steps meant to dampen the prospect of a nuclear arms race throughout the Middle East.

"Israel should announce how much weapons usable material it has produced and that it will unilaterally mothball Ñ but not yet dismantle Ñ Dimona, and place the reactor's mothballing under IAEA monitoring," the report said. "At the same time, Israel should announce that it will dismantle Dimona and place the special nuclear material it has produced in 'escrow' in Israel with a third trusted declared nuclear state, e.g., the U.S."

"It should make clear, however, that Israel will only take this additional step when at least two of three Middle Eastern nations Ñ Algeria, Egypt or Iran Ñ follow Israel's lead by mothballing their own declared nuclear facilities that are capable of producing at least one bomb's worth of weapons usable material in one to three years," the report said.