Aug. 30 (Bloomberg) -- Iran may be cleared of suspicion it was developing nuclear weapons after slowing uranium enrichment and cooperating with inspectors, the UN's atomic agency said.

``In what we think is an important step, for the first time we have agreed with Iran on a plan to resolve issues,'' the International Atomic Energy Agency's top inspector, Olli Heinonen, told reporters today at the IAEA's Vienna offices. ``The outstanding issues were what triggered all the Security Council proceedings some time ago.''

Iran is enriching uranium to the level sufficient to fuel a power plant, and not to the concentration required for a weapon, the IAEA said today in a report for the UN Security Council.

The country has been under UN sanctions since December for refusing to suspend enrichment while inspectors tried to determine the source of Iran's uranium-enrichment technology, the origin of blueprints with some details of a nuclear warhead, and whether experiments with plutonium were part of an arms program.

The IAEA's assessment of Iran is unlikely to satisfy U.S. demands that the country scrap uranium enrichment. The Bush administration accuses Iran of trying to destabilize the Middle East and using the development of atomic power to disguise the pursuit of a weapon. Iran denies the allegations.

`Ratchet Up Pressure'

U.S. State Department spokesman Tom Casey said the latest IAEA findings don't change ``the basic facts.'' Iran is ``still moving forward with uranium enrichment, despite whatever technical problems they may have with it,'' he told reporters in Washington today. ``The international community is going to continue to ratchet up the pressure.''

The IAEA-monitored nuclear Non-Proliferation Treaty, to which the Islamic Republic is a signatory, allows the enrichment of uranium or the reprocessing of plutonium for power plants while banning weapons production.

Iran has about 1,968 enrichment centrifuges at a nuclear- fuel factory in Natanz, the agency said today. IAEA Director- General Mohamed ElBaradei predicted in June that Iran would be operating 3,000 by last month.

Samples taken from Iranian enrichment equipment indicated scientists had produced uranium at a concentration of 3.7 percent, compared with the 4.8 percent Iran reported, the IAEA said. Uranium enriched to about 5 percent can fuel a reactor.

It would take 1,500 centrifuges spinning non-stop for a year to make the 28 kilograms (62 pounds) of 90 percent-enriched uranium needed for a bomb, according to nuclear physicist David Albright of the Institute for Science and International Security in Washington.

Reactor Project

Senior UN diplomats said Iran has slowed the rate of enrichment, as well as the pace of construction work on a new plutonium-fueled reactor in Arak, since the agency's last report to the Security Council in May. The diplomats declined to be identified because they were talking about the report before it had been presented to the Security Council.

The U.K., a permanent member of the Security Council, said Iran must take further steps to end the nuclear dispute.

``Our confidence in Iran's nuclear intentions will not be restored unless it also moves on the safeguards and transparency issues that the IAEA has requested, and suspends enrichment- related and reprocessing activities,'' the Foreign Office in London said today in an e-mailed statement after the IAEA report was released.

The report, required by the Security Council after the sanctions were imposed, follows an agreement between the agency and the government in Tehran that gives inspectors greater access to Iranian atomic facilities. Iran and the UN agency said Aug. 27 in a letter that they agreed to clarify questions about plutonium experiments and the origins of the uranium enrichment program.

Iranian Delegation

The accord clarifies ``all remaining issues, and the agency confirmed that there are no other remaining issues and ambiguities regarding Iran's past nuclear program,'' Iran's delegation at the agency in Vienna wrote in a document circulated to the rest of the countries represented on the 35-member IAEA board of governors.

Today's report ``is good news in itself, but I doubt it will be welcomed wholeheartedly by the UN Security Council,'' Ali Ansari, a professor of Iranian history and an associate fellow at the Chatham House international affairs institute in London, said in a telephone interview. ``Washington will say Iran is being manipulative, giving a little to avoid sanctions in the short term.''

Follow-Up Questions

IAEA inspectors won't rush to close their investigation into Iran's past nuclear activities and have the right to follow up unsatisfactory Iranian answers, Heinonen said.

``If the answers are not satisfactory, we are presenting them with new questions,'' the Finnish diplomat said. ``The process continues until we are satisfied with what we received.''

The Iran-IAEA deal earlier this month drew immediate criticism from the U.S. The U.S. ambassador to the UN agency, Gregory Schulte, said the accord had ``real limitations.'' Undersecretary of State Nicholas Burns told Radio Free Europe the U.S. will push ``very, very hard'' for a third round of Security Council sanctions next month.

IAEA inspectors are taking seriously threats by Iran's leadership that the country will drop the initiative to cooperate more closely if additional Security Council sanctions are imposed, said the UN diplomats.

Crude oil for October delivery fell from a three-week high on the news that Iran, with the world's second-biggest oil and natural gas reserves, may be cleared by the IAEA. Crude oil for October delivery traded at $73.30 a barrel at 10:52 a.m. on the New York Mercantile Exchange.

To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net.

Last Updated: August 30, 2007 12:59 EDT