In a confidential report, the International Atomic Energy Agency said that while Iran had been guilty of breaching international safeguards, almost two years of inspection had uncovered no proof of an illicit weapons program.

The IAEA's report sets the stage for a definitive review of Iran's nuclear program when its board of governors meets here on November 25, with the United States charging that Tehran is secretly developing nuclear weapons.

"All the declared material in Iran has been accounted for, and therefore such material is not diverted to prohibited activities," the IAEA report said, according to a copy obtained by AFP.

A diplomat close to the agency pointed out that the IAEA's legal authority was to investigate nuclear material and was "quite limited when you get into the area of nuclear weapons related activity."

The report said the IAEA was "not yet in a position to conclude that there are no undeclared nuclear materials or activities in Iran."

Washington wants the agency to haul Iran before the UN Security Council for possible sanctions, but the Iranian agreement to suspend enrichment, and the lack of a "smoking gun" in the report, will make that task harder.

The report was issued after Iran agreed in a deal with Britain, France and Germany to suspend uranium enrichment activities pending a longer-term accord, comprised of European Union incentives and "objective guarantees" it will not make nuclear weapons.

A text of the agreement released in Tehran said the suspension covers "the manufacture and import of gas centrifuges and their components; the assembly, installation, testing or operation of gas centrifuges; work to undertake any plutonium separation... and all tests or production at any uranium conversion installation".

Uranium enrichment makes fuel for nuclear reactors but also what can be the explosive core for atomic bombs.

"The suspension will be sustained while negotiations proceed on a mutually acceptable agreement on long-term arrangements," the text said.

Iran said those talks, carried out by the European trio on behalf of the EU would begin in the first half of December.

The United States reacted cautiously to Iran's pledge to suspend enrichment, saying Tehran must show by deeds not words it was renouncing efforts to produce a nuclear bomb.

"We are making clear, this needs to be more than promises. This needs to be promises made and promises implemented," State Department spokesman Richard Boucher told journalists in Washington.

A European diplomat in Vienna said it was now "out of the question" for the IAEA to take Iran to the Security Council.

European Union foreign affairs chief Javier Solana said the agreement was welcome, but was only a first step.

"Potentially it is the start of a new chapter in our relations," said Solana. "It is however only the start. We now need to work rapidly to produce a solid long-term agreement."

Solana said talks on a bilateral economic agreement could resume once suspension of enrichment was confirmed by the IAEA. Tehran meanwhile said it expected the EU to support its bid to join the World Trade Organization (WTO).

The United States is still certain to point out that the IAEA found Tehran guilty of "many breaches" of international nuclear safeguards obligations.

"It is clear that Iran has failed in a number of instances over an extended period of time to meet its obligations under its safeguard agreement with respect to the reporting of nuclear material, its processing and its use as well as the declaration of activities where such material has been processed and stored," the IAEA report said.

"Iran's policy of concealment continued until October 2003 and has resulted in many breaches of its obligations to comply," it said.

Iran has been cooperating, although somewhat reluctantly, with the agency since then. In September, the IAEA demanded that Iran suspend all activities concerning uranium enrichment.

The report noted that Iran had invited the agency to verify the suspension as of November 22, although this would leave inspectors only three days before the board meeting to confirm Iran's suspension.

"We may or may not finish by the board" meeting, a Western diplomat close to the IAEA said, adding that the agency "will do its job and do it thoroughly and if it takes a few more days, it will take a few more days."

The board meeting is expected to last around a week.

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