The pilot facility uses "pyrometallurgical processing" to make spent fuel into a compact and less radioactive form for storage, said the diplomat, who asked not to be named due to the sensitivity of the issue.

"What's critical in all this is to make sure that when reducing spent fuel that the South Koreans don't separate out plutonium," said the diplomat, who is close to the watchdog International Atomic Energy Agency (IAEA).

The IAEA was concerned because the pyrometallurgical process, which uses high temperatures to transform metals and their ores, can produce large amounts of plutonium, the diplomat said.

The investigation was confirmed by another source close to the IAEA.

The advanced spent fuel conditioning process demonstration facilityat the Korea Atomic Energy Research institute in Daejeon has been under construction since 2004 and is not expected to come online until 2007, the diplomat said.

"The process is pyrometallurgical processing. It is a different kind of processing" than the plutonium separation for which the IAEA investigated South Korea last year, the diplomat said.

If the suspicions are confirmed, Washington and its ally Seoul would be embarrassed in their efforts to pressure North Korea to end its nuclear weapons drive.

"Revelations about South Korea's nuclear activities remind everyone of the high stakes" on the Korean peninsula, the Bulletin of the Atomic Scientists said in an article last February.

Plutonium, like uranium, can fuel nuclear power plants or be used in atom bombs.

South Korea, which has 19 nuclear power reactors, pledged in 1992 not to acquire plutonium or uranium enrichment facilities as part of a commitment to keeping the Korean peninsula free of nuclear weapons.

The IAEA's concern is "what could happen," the diplomat said, adding that South Korea has said that the facility is "ostensibly not for separation of plutonium."

The IAEA in November 2004 chided South Korea for making small amounts of weapons-grade nuclear material but opted not to refer Seoul to the UN Security Council for possible sanctions.

South Korea had the previous August admitted to the IAEA that its scientists had conducted secret experiments in separating plutonium in the 1980s, producing 0.7 grams of weapons-grade, 98 percent pure PU-239 isotope.

Seoul also reported enrichment of uranium in 2000 at the research institute in Daejeon that produced 200 milligrams of uranium, some of it to a level close to weapons-grade.

Even though the amounts are tiny their production raised great concerns amid the efforts to de-nuclearize the Korean peninsula.

Seoul said the tests were conducted without government authorization and had stopped.

The planned ACPF facility would "take spent fuel rods, cut them up and then remove fuel pellets" for treatment, which would reduce both the "radiation levels and the volume, so it is easier to store the stuff," the diplomat said.

IAEA inspectors have been monitoring the building of the facility, the diplomat said, without elaborating.

The diplomat said the project of building the facility was originally conceived in 1997 and that "tests have been conducted (for this) at Daejeon" since 2000.

All rights reserved. © 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.