The resolution is to be submitted to the 35-nation board of governors of the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), which is meeting this week at its headquarters in Vienna.

It must still be reviewed by other members of the board, such as non-aligned states, and some countries could still seek modifications of the text, said one Western diplomat.

But the text still seems to have broken a logjam in talks here.

The United States, which claims Iran is secretly developing nuclear weapons, along with Canada and Australia, had been pushing for a tough text against Iran but Britain, France and Germany wanted a milder draft in order to keep Iran cooperating with the IAEA.

The so-called Euro 3 had in October struck a deal with Iran to cooperate with the IAEA, and are stressing the path of "constructive engagement", a Western diplomat said.

In Tehran, Iranian Foreign Minister Kamal Kharazi warned Tuesday that Iran, which claims its atomic program is strictly peaceful, will "not accept" being declared as having violated nuclear safeguards agreements.

In Vienna, Malaysian ambassador to the IAEA Gulam Haniff, who represents the 13 non-aligned nations on the IAEA board, said he had not yet seen the text but that he felt it was necessary to have the "full cooperation of Iran" in order to clear up questions about its nuclear program.

He said the IAEA "must also provide the right signals to allow this environment of cooperation to continue."

But a senior State Department official warned late Tuesday in Washington that Iran is likely to be referred to the UN Security Council to look at possible sanctions against it unless it radically alters its attitude on matters relating to its nuclear program.

"If Iran continues down this course, that would be the logical conclusion," the official said, speaking on condition of anonymity.

The compromise draft, a copy of which was obtained by AFP, condemns Iran for failing to report such crucial technologies as advanced P-2 centrifuge designs for making enriched uranium that could be weapon grade.

But it puts off any immediate reaction, such as citing Iran for non-compliance with the nuclear Non-Proliferation Treaty (NPT), a move that would take the issue to the UN Security Council for possible sanctions.

The compromise draft text notes "with the most serious concern" that Iran's declaration last October on its nuclear program "did not amount to the correct, complete and final picture of Iran's past and present nuclear program, as considered essential" by the board in a resolution it had passed last November.

The text quotes IAEA chief Mohamed ElBardei in saying it "deplores" that the October report "which was to have provided 'the full scope of Iranian nuclear activities' and a 'complete centrifuge R&D chronology" had "omitted any reference . . . (to Iran's) possession of P-2 centrifuge design drawings and to associated research, manufacturing, and mechanical testing activities."

The draft also refers to a February report by ElBaradei that found "that most of the workshops used in Iran's centrifuge enrichment program are 'owned by military industrial organizations.'"

But it said the IAEA would "defer until its June meeting consideration of progress in verifying Iran's declarations and of how to respond to the above-mentioned omissions."

A diplomat said the position of the three European powers was that the IAEA should be trying to encourage Iran's cooperation with the Vienna-based nuclear watchdog, even while it criticizes the Islamic Republic for its continuing breaches of the NPT.

Washington, however, wants to keep "the pressure on" Tehran to fully dislose its activities.

"There's still a lot of discussion among board (of governors) members on what would be the appropriate balance in a resolution on Iran," ElBaradei had earlier Tuesday told reporters.

Meanwhile, the IAEA board is expected Wednesday to report Libya to the UN Security Council for previous non-compliance with the NPT but praise it for its current cooperation.

The draft text of the Libya resolution begins by "applauding" Libya's decision last December 19 to dismantle its weapons of mass destruction programs.

Its finding of non-compliance is "for information purposes only," the text says, with no threat of sanctions against the North African country.

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