IAEA warns of Iran atomic risk amid EU-Tehran talks

VIENNA, June 11 (Reuters) Iran's nuclear behaviour poses a serious concern it might gain the ability to build atom bombs, the UN atomic watchdog agency said today as the EU had exploratory talks with Tehran it described as constructive.

A European Union official denied accounts from other diplomats that the Vienna talks between Iranian deputy nuclear negotiator Javad Vaeedi and Robert Cooper, a top aide to EU foreign policy chief Javier Solana, had been abortive.

''Today's working session was good; I consider it kind of constructive ... (but) it is completely true that you should not expect kind of a huge miracle,'' Vaeedi said after the 4 1/2-hour expert-level meeting, aimed at smoothing the way to more talks between Solana and Iranian chief negotiator Ali Larijani.

''We made progress but also one cannot expect miracles in this business,'' Cooper told reporters alongside the Iranian.

There was no sign of headway towards settling the core dispute.

Iran refuses to suspend its expanding nuclear fuel programme in exchange for a suspension in UN sanctions and negotiations on trade benefits offered by world powers.

Vienna-based diplomats had earlier said the talks broke off because Vaeedi refused to discuss issues of substance.

They said a meeting planned later today between Vaeedi and two senior officials of the watchdog International Atomic Energy Agency (IAEA) was cancelled for the same reason.

The United States and its allies fear Iran is trying to develop atomic bombs behind the facade of a nuclear energy programme, rather than generate the electricity it says it needs for peaceful economic development.

The standoff is sharpening as world powers consider whether to push for a third, harsher round of UN Security Council sanctions to try to force Iran to freeze enrichment work.

Larijani promised Solana at a May 31 meeting in Madrid to do more to clear up IAEA inquests into the nature of its programme. But Tehran said the gesture depended on an end to Security Council action -- a nonstarter for world powers.

IAEA director Mohamed ElBaradei told a meeting of its governing board Iran had made itself the agency's No. 1 nuclear proliferation concern by significantly expanding its uranium enrichment programme while curbing cooperation with inspectors.

''This is disconcerting and regrettable,'' he said in a downbeat speech opening the gathering of the 35-nation board.

EXPANDING PROGRAMME ''The facts on the ground indicate that Iran continues steadily to perfect its knowledge relevant to enrichment, and to expand the capacity of its enrichment facility,'' said ElBaradei.

''This is taking place without the agency being able to make any progress in its efforts to resolve outstanding issues relevant to the nature and scope of Iran's nuclear programme.

At the same time, he said he was growing alarmed about the ''current stalemate and brewing confrontation'' between Iran and world powers, which he fears could lead to US-Iranian war inflaming the West Asia without a diplomatic compromise.

For over a year, Iran has limited inspections to declared nuclear sites, barring short-notice visits to other areas to probe indications of undeclared activity with military links.

In April, Iran stopped providing advance design information on planned nuclear sites, including a heavy-water reactor.

A May 23 IAEA inspector report said Iran had not only ignored a UN deadline to stop enrichent but had made big strides in its programme since the start of this year.

A UN official said Iran now had 2,000 centrifuges on line and was on pace for 3,000 by next month. That would lay the basis for ''industrial scale'' enrichment that could yield enough refined uranium for an atom bomb within a year.

Iran insists it will only enrich uranium to the grade required for power reactors, not the far higher concentration needed for nuclear explosives.

REUTERS KK BD1935