"Iran's nuclear weapons programme and the now well-documented pattern of its (Non-Proliferation Treaty) safeguards violations are deeply troubling," a US State Department official said Tuesday, after the UN atomic watchdog agency issued a new report on Iran.

But British Foreign Secretary Jack Straw on Wednesday urged calm.

"We should be reacting calmly to this latest report. We have to pursue this matter patiently and by diplomatic means," Straw told the BBC.

The report released by the International Atomic Energy Agency (IAEA) on Monday accused Iran of conducting two decades of covert nuclear activities, including making plutonium, though said there was no evidence as yet it was trying to build an atomic bomb.

The United States -- which has dubbed Iran part of an "axis of evil" with North Korea and Iraq -- accuses Tehran of secretly trying to develop nuclear weapons and wants the IAEA to take the issue to the UN Security Council when the agency's board meets next week.

But Britain, France and Germany have repeatedly urged opening up a dialogue with oil and gas-rich Iran. A visit by their foreign ministers to Tehran in October won key concessions over Iran's nuclear program, in what EU foreign policy chief Javier Solana hailed Wednesday as a model of how Brussels could make a difference in global security.

"Iran is a clear case of the use of preventive action. We are doing it, we are engaged," he said in Berlin.

IAEA chief Mohamed ElBaradei delivered his report Monday to members of his 35-nation board of governors, which is now to meet November 20 to decide if Iran is in breach of NPT safeguards. A judgement of non-compliance would send the issue to the Security Council.

"Dr ElBaradei's report reinforces our concerns. Iran's defiance of its NPT safeguards obligations present a serious challenge to the IAEA and to the NPT-based nuclear non-proliferation regime," the US official said.

Straw, however, stressed that ElBaradei was "reporting a considerable degree of cooperation by the Iranians."

"I can't say whether this cooperation is complete but it has certainly been substantial," he said.

"It's a matter for the (IAEA) board to decide whether or not the matter should be referred to the (UN) Security Council, and I'm not going to preempt the decision of the board," he added.

Iran's President Mohammad Khatami meanwhile said Wednesday he had complaints about the report but would wait for the board meeting.

"We will continue our cooperation with the agency and we are waiting for the board of directors meeting. If their attitude is political, we reserve the right to change our attitude," Khatami said, although added, "I am optimistic."

The diplomatic tug-of-war pits IAEA member states in favor of passing a non-compliance resolution with those advocating a lighter reprimand that would encourage Tehran to keep cooperating.

This puts the European countries on a collision course with the United States which is unwilling to accept anything less than taking non-compliance to the Security Council, a Western diplomat in Vienna said.

The trip by the foreign ministers from Britain, France and Germany won a written promise of cooperation from Iran on October 21 --10 days before an October 31 deadline imposed by the IAEA for full disclosure.

Iran then followed up with a report that answered the IAEA's questions about its nuclear program, a letter agreeing to tougher inspections and the suspension of its enrichment of uranium that could be weapons-grade.

In Vienna, a Western diplomat pushing for a non-compliance resolution insisted Iran only "moved forward ... because it was put under a deadline," and such pressure must be maintained.

Other diplomats said a compromise resolution that would judge Iran in non-compliance but make clear it should get credit for cooperating would be unacceptable to the European big three.

Britain, France and Germany "believe since they reached this cooperation with Iran, that there is an understanding with Tehran that these three countries will not be involved in taking the process out of the IAEA," the Western diplomat said.

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