Iran said Sunday it had sent a letter to the watchdog International Atomic Energy Agency (IAEA) withdrawing its demand to exempt 20 centrifuges from a freeze of nuclear fuel cycle activities and accepts full suspension of uranium enrichment, Iranian nuclear negotiator Hossein Moussavian told AFP.

Hardliners in Iran had said the exemption should be maintained for research purposes but Moussavian said: "I confirm from my side that we have delivered the letter to the IAEA to confirm that Iran will permit the IAEA to place these components, 20 centrifuges, under agency surveillance."

"Iran will not conduct any testing (of the centrifuges) and will discuss further with the EU3 (Britain, Germany and France) in December when discussions for a long-term arrangement (on the freeze) commence," Moussavian said.

The EU has promised increased trade, which would include helping Iran get into the World Trade Organization and a host of other incentives, but these are part of a long-term agreement to be worked out after the suspension takes affect.

Moussavian said Iran was also set to conclude talks later Sunday with EU negotiators Britain, France and Germany on a resolution the European trio is to submit Monday to a meeting of the IAEA's 35-nation board of governors.

The resolution puts the IAEA's stamp of approval on the enrichment suspension, a confidence-building measure the European trio negotiated with Iran and which is designed to allay US charges that Tehran is secretly developing nuclear weapons.

The IAEA is continuing to investigate Iran as agency chief Mohamed ElBaradei has said that while no diversion of nuclear materials for weapons purposes has been detected, he can not yet rule out that there is covert activity.

But Iran says its nuclear program is strictly peaceful and wants its dossier at the IAEA to be normalized, with routine inspections, rather than the current special inquest.

The United States wants the IAEA to send Iran before the UN Security Council, which could impose economic sanctions, for almost two decades of hiding sensitive nuclear work but that is almost totally unlikely once Iran has agreed to a full enrichment suspension and accepts the current European draft resolution, diplomats said.

Moussavian said the only remaining problem in the resolution was a phrase that "underlines that the full and sustained implementation of this confidence-building measure is essential to addressing outstanding issues."

He said the Europeans had wanted the word "essential" to be left in while Iran wants the phrase "not legally binding" to be added as it claims it has the right to enrich uranium according to the nuclear Non-Proliferation Treaty (NPT), even it is for now voluntarily agreeing to a freeze.

"Most probably the Europeans will be flexible and accept Iran's offer to add in the same paragraph 'not legally binding'," Moussavian said.

European diplomats had ruled out any use of the centrifuges, even just to spin-test their rotors, as breaking the promised freeze.

Asked about the resolution, which according to IAEA rules must be introduced the day before a meeting in order to be considered, a European diplomat said: "I think it's going to happen tonight (Sunday)."

Iran-EU talks to rescue the agreement on the enrichment freeze broke off Saturday, opening the door to moves by the IAEA towards UN sanctions.

A diplomat close to the talks said EU negotiators Britain, France and Germany had given Iran until late Sunday to agree to a full freeze, or they would propose a tough resolution at the IAEA meeting, which was supposed to end after two days on Friday but was adjourned until Monday due to the deadlock.

But the European trio have for over a year been stressing a policy of "constructive engagement" to get Iran to cooperate with the IAEA and would rather table their accommodating resolution, which still calls on ElBaradei to notify the IAEA board of governors "should the suspension not be fully sustained," although earlier versions that said this should be "immediately" and then "without delay" have been dropped.

But another problem, and this could still torpedo the long-term arrangement talks, is that Iran is insisting on its right to continue nuclear research, even if work with the 20 centrifuges is suspended.

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