In a letter dated 5 May 2003, Iran informed the IAEA for the first time of its plan to construct a 40MW heavy water research reactor fueled by natural uranium oxide. [1] The Atomic Energy Organization of Iran (AEOI) claims that the reactor will be used for research, radioisotope production, and technical training. [2] The AEOI plans to install the reactor vessel in 2011, and the reactor is expected to go critical in 2013. [3]

Iran tried to purchase a heavy water moderated reactor during the 1990s. Tehran secretly approached at least four nuclear suppliers but was repeatedly turned down. However, after unspecified foreign experts provided technical assistance, Iran began constructing the reactor on its own. [4] Starting in August 2008, Iran stopped allowing IAEA visits to the construction site. After Iran completed construction of the reactor vessel's containment dome the Agency was unable to remotely monitor construction progress. [5] Following repeated requests, Iran provided the IAEA access to the IR-40 reactor in August 2009, at which time the Agency was able to carry out design information verification (DIV). [6] The IAEA confirmed that the facility "at its current stage of construction conforms to the design information provided by Iran as of 24 January 2007," although Iran still has not provided updated and detailed design information.[7] As of August 2009, Iran estimated that the plant was approximately 63% completed, including installation of the reactor vessel's containment dome.[8]

Heavy water reactors are troublesome from a proliferation standpoint because they are capable of yielding high quality, weapons-grade plutonium. Fueled by natural uranium, the reactors also do not require their owners to enrich uranium in order to produce weapons-usable material. [9] The Institute for Science and International Security (ISIS) estimates that if operated efficiently, the IR-40 will be capable of producing 9kg of plutonium annually, enough for approximately one-and-a-half nuclear weapons per year.[10] Before Iran could use any of the plutonium in a nuclear weapon, however, it would first need to separate it from the reactor's spent fuel. In 2004, Iran declared that due to difficulties obtaining equipment and technical information, it would not consider constructing hot cells for long-lived radioisotopes at the Arak complex. [11] Yet according to the August 2009 IAEA report, Iran stated that it had been trying to procure hot cell windows and manipulators for the IR-40 from foreign sources, and was considering producing them domestically. [12]

Many nonproliferation analysts also question the need for a large, heavy water-moderated reactor for scientific research and isotope production. Robert Einhorn argued in 2006 that "much smaller, light-water research reactors are fully satisfactory for the kinds of applications Iran says it is interested in," and compared Iran's plan to use the IR-40 for peaceful purposes to using a 12-inch hunting knife for spreading jam on toast. [13] Iranian officials defend the rationale behind the reactor's construction by saying that they had not known at the time whether their uranium enrichment program would succeed. Therefore, they also decided to develop a natural uranium alternative. [14]

Sources:
[1] "Implementation of the NPT Safeguards Agreement in the Islamic Republic of Iran," International Atomic Energy Agency (IAEA), 6 June 2003, www.iaea.org.
[2] David Albright and Paul Brannan, "Arak Heavy Water Reactor Construction Progressing," The Institute for Science and International Security, 13 November 2008, www.isis-online.org.
[3] International Atomic Energy Agency (IAEA), "Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," Report by the Director General, 28 August 2009, www.iaea.org; David Albright and Paul Brannan, "Arak Heavy Water Reactor Construction Progressing," The Institute for Science and International Security, 13 November 2008, www.isis-online.org.
[4] Robert Einhorn, "Iran's Heavy-Water Reactor: A Plutonium Bomb Factory," Arms Control Association, 9 November 2006, www.armscontrol.org.
[5]"Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," International Atomic Energy Agency (IAEA), 5 June 2009, www.iaea.org.
[6] International Atomic Energy Agency (IAEA), "Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," Report by the Director General, 28 August 2009, www.iaea.org.
[7] International Atomic Energy Agency (IAEA), "Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," Report by the Director General, 28 August 2009, www.iaea.org.
[8] International Atomic Energy Agency (IAEA), "Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," Report by the Director General, 28 August 2009, www.iaea.org.
[9] Robert Einhorn, "Iran's Heavy-Water Reactor: A Plutonium Bomb Factory," Arms Control Association, 9 November 2006, www.armscontrol.org.
[10] The IAEA considers six kilograms of plutonium sufficient for production of a nuclear weapon. David Albright and Paul Brannan, "Arak Heavy Water Reactor Construction Progressing," The Institute for Science and International Security, 13 November 2008.
[11] "Implementation of the NPT Safeguards Agreement in the Islamic Republic of Iran," International Atomic Energy Agency (IAEA), 1 June 2004, www.iaea.org.
[12] International Atomic Energy Agency (IAEA), "Implementation of the NPT Safeguards Agreement and the Relevant Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran," Report by the Director General, 28 August 2009, www.iaea.org.
[13] Robert Einhorn, "Iran's Heavy-Water Reactor: A Plutonium Bomb Factory," Arms Control Association, 9 November 2006, www.armscontrol.org.
[14] International Atomic Energy Agency, "Implementation of the NPT Safeguards Agreement in the Islamic Republic of Iran," Report by the Director General, 10 November 2003, www.iaea.org.