Iran slowing down uranium enrichment work--ElBaradei

VIENNA, July 9 (Reuters) Iran has slowed the expansion of its disputed uranium enrichment programme, the head of the International Atomic Energy Agency said today, after Western powers threatened to hit Tehran with harsher sanctions.

The Iranian shift was detected by IAEA inspectors last week after months in which Iran accelerated the installation of centrifuge machines that refine uranium, an effort Western leaders suspect is covertly meant to yield atomic bombs.

The United States has said it, Britain, France, Germany, Russia and China have begun deliberating a third and more painful batch of UN sanctions. Iran has condemned the first two imposed since December over its refusal to halt enrichment, insisting its programme aims only at generating electricity.

IAEA director Mohamed ElBaradei said agency inspectors who just revisited Iran's vast underground enrichment plant at Natanz also noticed a ''fairly slow'' pace of feeding uranium into the centrifuges for enrichment.

''We saw a slowing in the process of commissioning new cascades,'' he told reporters, referring to interlinked networks of centrifuges that spin at high speeds to refine uranium into nuclear fuel.

''It is not a full-size freeze, but it is a fairly marked slowdown... I hope at this delicate stage Iran will even freeze what they have (running),'' he said after an IAEA meeting.

He said the slowdown was a step in the right direction and he likened it to an Iranian pledge to him last month to start producing answers to IAEA investigations meant to verify whether its programme is wholly peaceful or military in nature.

''I welcome this since Iran at this stage needs to do everything to cool things down'', ElBaradei added. This could be cause for restraint in the Security Council, he suggested.

The United States voiced scepticism over the reported enrichment slowdown.

''I would not necessarily read too much into that and whether or not that is a conscious political decision or whether or not it's an issue of technical problems,'' State Department spokesman Sean McCormack said. ''I could not tell you.'' TUNNEL WORK NEAR ENRICHMENT PLANT? New questions arose about Iran's activity when US analysts today published satellite photos they said suggested Tehran is building a new tunnel complex in a mountain linked to the nearby Natanz plant in a possible bid to protect sensitive uranium enrichment activity from aerial attack.

In June, ElBaradei urged Iran to stop expanding centrifuge capacity in return for a UN ''timeout'' on seeking further sanctions -- an interim step toward breaking a deadlock with world powers over their demand for a total enrichment shutdown.

ElBaradei has warned Western leaders that their insistence on zero nuclear activity in Iran may no longer be politically realistic due to its rapid progress in launching centrifuges.

He suggested only a compromise, perhaps capping Iranian enrichment work at its current low and closely-monitored level, and not more sanctions, would resolve the crisis peacefully.

A ''timeout'' has been discussed in exploratory Iran-EU talks, diplomats said, although Tehran has publicly ruled it out.

A senior UN official familiar with Iran's programme said the slowing pace in enrichment work would ''for sure'' jeopardise Iran's timetable to have 3,000 centrifuges running by the end of July to lay the basis for refining uranium in usable amounts.

Senior IAEA officials will go to Tehran tomorrow to flesh out a ''plan of action'' to resolve IAEA inquiries agreed on June 22 by Iranian chief negotiator Ali Larijani and ElBaradei.

Reuters SBA VP0202