This appears to mark a further step away from Iran's commitments to suspend as a confidence-building measure the enrichment process that is crucial to making what can be the explosive core of an atomic bomb.

The news came in a report by the International Atomic Energy Agency ahead of an IAEA meeting in Vienna later this month to review the agency's investigation into US charges that Iran is secretly developing nuclear weapons.

In what appeared to be a boost for Iran, the report said it was "plausible" that Iran was telling the truth in claiming uranium contamination found by IAEA inspectors had come from imported equipment and not because Tehran was making material for an atomic bomb.

"It appears plausible" that contamination by highly enriched uranium at two sites in Iran "may not have resulted from the enrichment of uranium at those locations," the IAEA said in the confidential report obtained by AFP.

A senior diplomat close to the IAEA said "one explanation is the contamination of components as Iran has claimed."

But he said: "There are other explanations that the IAEA is also looking into."

He did not elaborate but one possibility was apparently that Iran may have enriched uranium at other sites.

The report also said that the IAEA's research into Iran's laser enrichment and uranium conversion activities had confirmed Tehran's reporting on these issues, and that these activities would now only be subject to routine monitoring.

In Tehran, the Iranian government said the report was a positive step toward clearing up the country's file and demonstrating the peaceful character of the program.

But the report made clear that while Iran has helped the IAEA clarify certain key issues, the investigation would continue, at least until a board meeting scheduled for November, with the United States lobbying for Iran to be taken before the UN Security Council for possible sanctions.

The report said a key unresolved issue was why Iran had done no work on sophisticated P2 centrifuges for seven years after acquiring design drawings for the machines in 1995.

"The reasons given by Iran for the apparent gap between 1995 and 2002 do not provide sufficient assurance that there were no related activities carried out during that period," the report said.

The agency also wants to find out why plutonium made by Iran may be in fact more recently manufactured than the 12-16 years of age Tehran claims.

"This implies that plutonium separation activities were carried out more recently than has been declared," a senior diplomat close to the IAEA said.

The enrichment issue also cast doubt on Iran's intentions, diplomats said.

Uranium enriched to levels of over 80 percent can be used in nuclear weapons but also for peaceful purposes and Iran has insisted on the civilian nature of its program and its right to enrich uranium for fuel.

Iran plans "a large-scale test of (converting) 37 metric tonnes of yellowcake (uranium in mineral form)" into uranium hexafluoride (UF6), the gaseous "feed-stock" for enriching uranium to what can be bomb-grade levels, a senior diplomat close to the IAEA said.

The report said the "test" had been planned for August or September.

Iran had conducted a smaller test in "May and June 2004" for making UF6, the report said.

The diplomat said the upcoming production of the uranium hexafluoride would produce a "significant amount" of the gas, an amount that would apparently be enough to produce enough enriched uranium that could produce at least one atom bomb.

Iran had pledged to Britain, France and Germany last October to suspend uranium enrichment in order to show the world community that its atomic intentions were strictly peaceful.

Iran then in February told the three European countries that it would voluntarily suspend the assembly and testing of centrifuges, the machine used to enrich uranium.

But in June, Iran said it would resume assembling and testing centrifuges since the so-called Euro-3 had failed to come through on a promise to get the IAEA to stop investigating Iran's nuclear program.

The report said the Iranians had taken off seals the IAEA had placed to monitor centrifuge manufacture and use at crucial sites.

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