"Gaps remain in the agency's knowledge with respect to the scope and content of Iran's (uranium enrichment) centrifuge program," ElBaradei said. "Because of this and other gaps in the agency's knowledge, including the role of the military in Iran's nuclear program, the agency is unable to make progress in its efforts to provide assurance about the absence of undeclared nuclear material and activities in Iran.

"After more than three years of agency efforts to seek clarity about all the aspects of Iran's nuclear program, the existing gaps in knowledge continue to be a matter of concern," the report continued. "Any progress in that regard requires full transparency and active cooperation by Iran... if the agency is to be able to understand fully the 20 years of undeclared nuclear activity by Iran."

However, the monitoring agency was able to find evidence to back up Tehran's claim of enriching uranium in a cascade of 164 centrifuges.

"On April 13, 2006, Iran declared to the agency that an enrichment level of 3.6 percent had been achieved," the report said, adding five days later... The IAEA "took samples at (the) Pilot Fuel Enrichment Plant, the results of which tend to confirm as of that date the enrichment level declared by Iran."

Ambassador Emyr Jones Parry of Britain said he and the ambassadors of France and Germany were already working on a draft resolution the trio is sponsoring.

"We're consulting the United States very closely," he told reporters outside the council chamber. "I expect that early next week there will be discussions more broadly and by the middle of the week, I am quite confident, introduce into council, at 15 (members), a resolution to respond to this report."

There was no mention of sanctions.

U.S. Ambassador John Bolton of the United States said, "Our immediate task here in the council is clear, and that is to produce a resolution under (U.N.) Chapter VII making the IAEA resolutions mandatory."

A council resolution under Chapter VII carries the weight of international law, which is binding on all member states of the United Nations.

"The United States thinks the council is ready to proceed," Bolton said. "We're ready to move expeditiously and what comes after that is largely in Iran's hands."

Meaning, if Iran cooperates it won't have to face sanctions, or worse, down the road.

Ambassador Wang Guangya of China, this month's president of the council said diplomacy was still at work.

"The feeling of almost all the members, including all the major powers (permanent members Britain, China, France, Russia and the United States) is that this is an important issue and all we want is to work for a diplomatic solution because this region is already complicated," he said. "There are a lot of problems in the region and we should not do anything that would cause the situation (to become) more complicated."

However, Bolton cited Washington's reasons for a tough stance.

"Iran has done nothing to comply with existing IAEA Board (of Governors) resolutions or the request contained in the Security Council Presidential Statement that it suspend all enrichment-related activities, come into full compliance with the additional protocol and take a number of additional steps to show that in fact Iran's nuclear program is for purely civil, peaceful purposes, as they contend," the envoy said.

"I think, if anything, the IAEA report shows that Iran has accelerated its efforts to acquire nuclear weapons, although, of course, the report doesn't make any conclusions in that regard," he went on. "We are concerned about the continued work that Iran is doing to acquire nuclear weapons capability. We do think there's a sense of urgency here."

Since a Chapter VII resolution requires there be a threat to peace and security, Bolton was asked how Washington will present such a case.

"Evidence of Iran's efforts to acquire nuclear weapons, its extensive program to achieve a ballistic missile capability of longer and longer range and greater accuracy, constitutes a classic threat to international peace and security, especially when combined with Iran's long status as the world's leading state sponsor of terrorism," he said, echoing U.S. President George W. Bush's charge Tehran was part of an "axis of evil."

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