Israel is preparing for Iran to become a nuclear power and has accepted it may happen within a year, the London Times reported on Monday citing an Israeli security report.
The Institute for National Security Studies (INSS) think-tank prepared scenarios for the day after an Iranian nuclear weapons test at the request of former Israeli ambassadors, intelligence officials and ex-military chiefs, the paper reported.
Israel has so far maintained it will do all within its power to prevent Iran from obtaining nuclear capabilities, but has shifted its position following recent United Nations' reports, according to the Times.
The UN atomic agency said Monday that Iran is now enriching uranium at a new site in a hard-to-bomb mountain bunker, in a move set to stoke Western suspicions further that Tehran wants nuclear weapons.
INSS specialists including a former head of Israel's National Security Council and two former members of the prime minister's office conducted the simulation study in Tel Aviv last week.
If Iran does test a nuclear weapon, INSS predicts a profound shift in the Middle East power balance.
According to extracts of the report seen by the British publication, experts believe the US would propose a defence pact with Israel, but would urge it not to retaliate.
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Russia would seek an alliance with the US to prevent nuclear proliferation in the region, although Saudi Arabia would likely pursue its own nuclear programme, the report concluded based on current policies.
INSS specialists believe that an Iranian test in January 2013 would follow increasingly provocative demands by President Mahmoud Ahmadinejad's regime, including the redrawing of its Iraqi borders and action against the vessels of the US Fifth Fleet.
"The simulation showed that Iran will not forgo nuclear weapons, but will attempt to use them to reach an agreement with the major powers that will improve its position," said a passage of the report published by the Times.
"The simulation showed that (the Israeli military option), or the threat of using it, would also be relevant following an Iranian nuclear test," it added.
Israel condemned intelligence chief Meir Dagan last June after he speculated that Iran may obtain nuclear weaponry.
Conclusions from the simulation have been sent to Israeli Prime Minister Benjamin Netanyahu, the Times reported.
Iran, which insists its nuclear programme is for exclusively peaceful purposes, has repeatedly said it will not abandon uranium enrichment despite four rounds of UN Security Council resolutions calling on Tehran to desist.
While nuclear energy plants need fuel enriched to 3.5 percent, Iran says the 20-percent enriched uranium is necessary for its Tehran research reactor to make isotopes to treat cancers.