"This is a resolution we can live with," a Western diplomat said of the draft resolution that balances the US call to condemn Iran for almost two decades of covert nuclear activities with Britain, France and Germany's demand that Iran be rewarded for cooperating with the watchdog since October.

Non-proliferation expert Gary Samore told AFP the resolution was "a good compromise given that the United States was never going to get" backing at the 35-nation board of governors of the Vienna-based International Atomic Energy Agency (IAEA) to take Iran to the Security Council.

The United States, which says Iran is covertly developing nuclear weapons, "had to find a compromise that kept the pressure on Iran. I think this does," said Samore, a former US official now at the International Institute for Strategic Studies think tank in London.

"Basically, the board has given Iran another four months to demonstrate it can carry out commitments," Samore said, referring to the next IAEA board meeting in March.

In Paris, French President Jacques Chirac said the agreement "goes in the direction of efforts made by the international community to convince the Iranians to take effective and durable measures necessary to restore confidence."

He was speaking after a meeting with the European Union's foreign policy representative, Javier Solana who said he was "very happy" with what he saw as EU efforts to curb the development of nuclear weapons in Iran through diplomacy.

After five days of intense discussions with US diplomats, the European big three filed a draft resolution late Monday with the IAEA, diplomats said.

The resolution is expected to be adopted by consensus when the IAEA board meets Wednesday, resuming a meeting broken off last Friday due to the stalemate.

Iran's ambassador to the IAEA, Ali Akbar Salehi, who had said that taking the issue to the Security Council could set off an international crisis, told AFP his country was pleased with the draft resolution.

Iran is "looking for a peaceful resolution of the issue and I think we are on the right track," he said.

The IAEA board had begun meeting last Thursday to consider how to respond to a report from its chief Mohamed ElBaradei that Tehran has violated nuclear safeguards for the past 18 years, including making small amounts of plutonium and enriched uranium.

But ElBaradei said there was so far no evidence Iran was working on making nuclear weapons, an assertion Washington derided as "simply impossible to believe."

The United States had dropped demands to take Iran immediately before the Security Council, which could impose sanctions, for "non-compliance" with the nuclear Non-Proliferation Treaty (NPT), the diplomat said.

But it had still wanted a guarantee that the Council be alerted if Iran's violations continue.

The United States got this guarantee, considered a "trigger mechanism" in the draft, a Western diplomat said.

The clause said the if "any further Iranian failures come to light, the Board of Governors would meet immediately to consider . . . all options at its disposal, in accordance with the IAEA Statute and Iran's Safeguards Agreement," according to a full copy of the draft resolution obtained by AFP.

"I think the language is clear enough," a senior Western diplomat said.

Diplomats said the Europeans had feared that a direct mention of the Council could cause Iran to pull back from its October 21 agreement with them to cooperate with the IAEA.

That pact has led to Iran filing a comprehensive report on its nuclear program, pledging to allow wider inspections and suspending the enrichment of uranium.

In return, Iran was promised the issue would not go to the Security Council.

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