(CNN) -- The United Nations' nuclear watchdog agency confirmed Monday that uranium enrichment has begun at a nuclear facility in northern Iran.
On Sunday, a fundamentalist Iranian newspaper with ties to the nation's supreme leader said the enrichment had begun at the plant, which is "immune to any military attack."
"Based on reports we received yesterday, Iran has begun uranium enrichment at the Fordo facility at the height of the threats by foreign enemies," the semi-official Kayhan newspaper said.
"The IAEA can confirm that Iran has started the production of uranium enriched up to 20%" at Fordo, said International Atomic Energy Agency spokeswoman Gill Tudor. "All nuclear material in the facility remains under the agency's containment and surveillance."
The Fordo nuclear enrichment plant is in the mountains of Qom province, where Iran says it has 3,000 centrifuges in operation. Another nuclear facility in Natanz is said to have 8,000 of the machines enriching uranium.
Iran says there's a medical purpose behind the nuclear program.
"In order to provide medical assistance to 800,000 cancer patients, Iran needs to enrich uranium up to 20% to be able to feed Tehran's (research) reactor that produces the needed radioisotopes," the paper reported.
In Washington, U.S. State Department spokesman Victoria Nuland said the confirmation that Iran is enriching uranium to "a level that's inappropriate" is "obviously a problem."
"We are closely monitoring their nuclear program in general, and this development, given their track record and what the IAEA inspectors have been able to report, it's not a surprise to us, what we're hearing."
She said the IAEA has been able to get into the Fordo facility "on and off."
"They've been able to get into some facilities at some times, but what they're finding, as they get in there, is that Iran is not complying with its obligations," she said. "Iran plays this game with the inspectors. They let them go some places at some times when it seems to suit their purposes, but that doesn't change the fact that what the inspectors are now reporting is that they are taking the next step and escalating their violations of their own commitments."
The Iranian government announced in July that it was installing a new generation of centrifuges in its nuclear facilities.
At the time, the French Foreign Ministry called the development "a new wave of provocation" that flouted U.N. resolutions.
Enriched uranium at low concentrations can be used to fuel power plants, but in extremely high concentrations it can be used to produce a nuclear bomb. Uranium enriched to between 3% and 5% is necessary to make fuel for reactors. Weapons-grade uranium is enriched to about 90%.
If Iran is enriching uranium to 20%, "this is a further escalation of their ongoing violations with regard to their nuclear obligations, including the legally binding U.N. Security Council resolution," Nuland said. "So, obviously, we call on Iran once again to suspend enrichment activities, cooperate fully with the IAEA and immediately comply with all Security Council and IAEA board of governors resolutions."
"When you enrich to 20%, there is no possible reason for that, if you're talking about a peaceful program," she said. "So it generally tends to indicate that you are enriching to a level that takes you to a different kind of nuclear program."
Iran's development of missile and nuclear fuel technology has led to U.N. sanctions and accusations from Washington that the clerical regime is trying to develop nuclear weapons.
Officials in the United States and other Western nations have ratcheted up sanctions against Iran since a November report by the IAEA said the Iranian government was developing the technology needed to build a nuclear weapon. Last month, U.S. President Barack Obama announced sanctions against Iran's central bank.
"We are putting a great deal of pressure on Iran broadly because of its rogue behavior, if you will, the fact that it won't live up to its international obligations with regards to its nuclear program," White House spokesman Jay Carney said Monday. "Those actions that we're taking in concert with our international partners have had a significant impact on Iran, on the Iranian economy."
He added, "I believe it was just last week where the new sanctions, when they went into effect, had the impact of causing the Iranian currency to drop dramatically. So we work with our partners, as well as unilaterally, to increase that pressure."
Iran says it has a right to peaceful nuclear technology. The IAEA has said it cannot verify whether the intent of Tehran's nuclear program remains peaceful.
In Sunday's report, the fundamentalist paper appeared to thumb its nose at the West.
"Fordo is located deep inside mountains and due to its location is immune to any military attack," the article said. "Locating the 20% enrichment facility at Fordo means that the military threat option against Iran's nuclear program will be removed from the table forever and the West will be forced to slowly realize the immunity of this program against any foreign threat."
CNN's Shirzad Bozorgmehr and Ivan Watson contributed to this report.