"It would be good if Iran today would stop building additional centrifuges and installing (them) in Natanz. I think that could be a first step toward a time-out or freeze for peace," ElBaradei told reporters as his International Atomic Energy Agency (IAEA) closed a four-day meeting here.

ElBaradei said Iran had "no urgency in building (enrichment) capacity right now" since it did not have any nuclear power plants running.

He said Iran has from 1,700-2,000 centrifuges enriching uranium now at its underground plant in Natanz, and "our assessment is that by the end of July they might have 18 cascades (some 3,000 centrifuges) running. That is obviously a large number."

ElBaradei has proposed a "time-out" in which Iran would suspend uranium enrichment, which makes nuclear reactor fuel but also atom bomb material, and the UN Security Council would hold off on further sanctions against the Islamic Republic.

A moratorium would be a first step towards a deal to get talks started between Iran and world powers on giving Tehran trade, security and political benefits in exchange for it guaranteeing it will not develop nuclear weapons.

Preliminary talks between the European Union and Iran have foundered on Iran's refusal to consider either a moratorium or a suspension of enrichment.

The Security Council has imposed two sets of sanctions since December in a bid to get Iran to halt all uranium enrichment activities and to cooperate with an IAEA investigation of Iran's programme.

ElBaradei said Iran, which claims its nuclear programme is a peaceful effort to generate electricity, has not responded to the Council's call.

A diplomat close to the IAEA said that ElBaradei wanted to make clear that he does not favour Iran, after US complaints about his recent comments that Iran has already obtained the knowledge of how to enrich and so should be allowed to keep some enrichment capability in any deal.

Iranian ambassador Ali Asghar Soltanieh told reporters Thursday that Iran had mastered uranium enrichment and it was now too late for it even to consider suspending this sensitive technology.

ElBaradei said he was "increasingly disturbed" that there is "on the one hand, an increase in Iran's knowledge and capacity to enrich uranium, and on the other hand a decrease in our ability to clarify the nature of their programme" due to Iran's cutting down on voluntary cooperation beyond obligatory safeguards measures.

Outstanding issues touch on matters that could have military applications, such as documents about making the uranium metal hemispheres for atom bombs.

ElBaradei said Iranian "technology is going ahead without us able to clarify the nature of that programme and make the right assurance that it is exclusively for peaceful purposes."

Iran threatened Thursday to further reduce cooperation with the UN atomic agency if new sanctions are ordered.

For "each action there is a reaction, prompt reaction by Iran and that will continue"," Soltanieh said.

The IAEA board wrapped up its debate Thursday after both the United States and Europe warned that new UN sanctions against Iran loomed.

ElBaradei said he was "quite concerned also about the increasing confrontation," between the United States and Iran.

The United States has not taken the military option off the table.

ElBaradei said "the stalemate... does not in my view help the negotiated solution foreseen in the Security Council resolution."

He said there was time for diplomacy as there is a "consensus" that Iran is "three to eight years away" from being able to make an atomic bomb.

ElBaradei said the use of force against Iran "would be catastrophic, would be an act of madness frankly."

"Let's talk about how to find a solution through diplomacy and through dialogue," ElBaradei said.

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