UN body says Iran fails to meet deadline

A confidential report of the Vienna-based International Atomic Energy Agency (IAEA), leaked to Reuters, said Iran had resumed enriching small amounts of uranium in recent days. The agency said lack of Iranian cooperation had blocked its probes.

"Iran has not suspended its enrichment related activities," the report said. "Iran has not addressed the long outstanding verification issues or provided the necessary transparency to remove uncertainties associated with some of its activities."

"It is time for Iran to make a choice," Bush told a convention of U.S. veterans. "We've made our choice. We will continue to work closely with our allies to find a diplomatic solution, but there must be consequences for Iran's defiance and we must not allow Iran to develop a nuclear weapon."

French Foreign Minister Philippe Douste-Blazy said he deplored Iran's unsatisfactory response, but Russia, another veto-wielding U.N. Security Council member, was less forthright.

"The stage at which the U.N. Security Council is involved should start. This will happen very soon," a Russian Foreign Ministry spokesman said. Washington said the council could meet to discuss sanctions against Iran as early as next week.

Iran was defiant and shrugged off the threat of sanctions.

"The Iranian nation will never abandon its obvious right to peaceful nuclear technology," Iranian state radio quoted President Mahmoud Ahmadinejad as saying before the deadline.

The U.N. Security Council had asked Mohamed ElBaradei, head of the IAEA, to spell out on August 31 whether Iran had complied with the deadline set in a July 31 resolution.

Iran says it wants atomic energy only for electricity, although it hid sensitive research from U.N. inspectors for almost 20 years and has hindered U.N. investigations since.

Western leaders suspect a veiled arms project and the U.N. Security Council ordered Iran to suspend the work by August 31.

The IAEA report said its inspectors in mid-August found traces of highly-enriched uranium, of potential use for atom bombs, in a container at Iran's Karaj Waste Storage Facility. The IAEA asked Iran to explain the source of the contamination.

"Additional questions about the scope and nature of Iran's nuclear program have arisen during recent inspections," said a senior official close to the IAEA.

But there was no "smoking gun".

"Inspectors have not uncovered any concrete proof that Iran's nuclear program is of a military nature," the official said.

The U.N. watchdog report showed the dispute can be solved by the IAEA, a senior Iranian nuclear official told Reuters.

"This report shows Iran has logical interaction with the agency based on the safeguards and it shows Iran's nuclear issue can be resolved in the framework of the agency," said the deputy head of Iran's Atomic Energy Organization, Mohammad Saeedi. "This report carries no sign Iran's nuclear program is not peaceful."

In the days before the deadline, Iran launched a heavy-water production plant and pressed ahead with enriching uranium -- albeit in small, insignificant amounts -- at its pilot centrifuge site in Natanz, diplomats said.

But Iran, in an August 22 reply to an offer from six world powers of trade incentives not to enrich uranium, suggested it was open to negotiations on the scope of its program.

European foreign policy chief Javier Solana and Iran's chief nuclear negotiator Ali Larijani agreed by telephone on Thursday to meet soon in hopes of clarifying Iran's response, Solana's spokeswoman said. The exact date and venue were undecided.

Some U.S. allies in the European Union had asked for talks with Tehran to explore its reply instead of resorting quickly to sanctions at the Council, Western diplomats said.

In a possible nod to EU concerns, U.S. State Department spokesman Sean McCormack said that even if sanctions discussions began, Iran could still opt to halt enrichment work and spur broader negotiations to implement the package of inducements.

Iran is withholding answers to IAEA questions as bargaining chips for crunch talks with the big powers, diplomats say.

Moscow and Beijing, keen to protect energy contracts with Tehran and seeing no imminent threat from its nuclear program, have urged diplomacy.

EU nations, for their part, prefer to find a compromise with Iran rather than isolate one of their biggest oil suppliers.

One EU diplomat said Iran had a clear interest in seeking a meeting with the EU after August 31 to blur the U.N. deadline, suck the Europeans into talks about talks and push back any consideration of punitive action.

/Reuters/