A senior UN official who was familiar with the report cautioned against reading too much into the new findings, saying Iran had explained both and they could plausibly be classified as byproducts of peaceful nuclear activities.

The official, who spoke on condition of anonymity because he was not authorized to discuss the report publicly, said that while the uranium traces were enriched to a higher level than needed to generate power, they were below weapons-grade.

The report, prepared for next week's meeting of the 35-nation IAEA, also faulted Tehran for not cooperating with the agency's attempts to investigate suspicious aspects of Iran's nuclear program that have led to fears it might be interested in developing nuclear arms.

The US and its European allies are currently negotiating with Russia and China over a draft UN Security Council resolution that would penalize Iran for its refusal to respect an Aug. 31 deadline for halting uranium enrichment.

Russia and China have extensive trade with Iran and are rejecting the harsh sanctions that the Western allies want to impose.

President Bush, eager for Russian help in ongoing nuclear disputes with North Korea and Iran, visited President Vladimir Putin Wednesday in Moscow at an airport stopover on his way to Asia.

John Bolton, the US ambassador to the United Nations, warned Wednesday that reluctance to impose sanctions was misguided.

"However simple it is to say, there are a lot of people who think the commercial aspect of their relationship with Iran and North Korea is more important," Bolton told Fox News Wednesday. "Other countries are watching and if those two countries succeed in getting and keeping nuclear weapons, other countries will draw a bad conclusion."

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