IAEA EXPECTED TO CONFIRM IRANIAN DEFIANCE

ElBaradei, whose agency has been unable to verify that Iran's nuclear work is wholly peaceful after three years of investigations, was expected to report to the Security Council that Tehran had ignored the deadline to suspend enrichment.

But his report was now more likely to appear on Thursday, not Wednesday as expected, a diplomat close to the IAEA said.

ElBaradei has urged both sides to take a mutual "timeout" to enable talks -- Iran would suspend enrichment rather than accelerate it from research level to "industrial scale" as planned at its Natanz plant, while sanctions would be suspended.

A diplomat close to the IAEA said Iranian officials were sounding positive in private about a "timeout" and hoped EU foreign policy chief Javier Solana, who led earlier talks with Larijani, would be authorized to discuss it with him.

Western officials have dismissed previous such signs of Iranian flexibility as stalling while it seeks to master enrichment technology at its Natanz nuclear complex.

Iranian Foreign Minister Manouchehr Mottaki told a news conference in Turkey that Larijani and Solana had reached agreement that the negotiations should be resumed.

The Security Council is not expected to take action before the next meeting of the IAEA's 35-nation board of governors on March 5-9, leaving a little more time for dialogue to avert a feared U.S.-Iran conflict, said the diplomat close to the IAEA.

As a possible compromise to jumpstart negotiations, Larijani suggested earlier this month that Iran could pledge to refine uranium no higher than the 4-5 percent level, sufficient for power plant fuel but far below the 80 percent needed for bombs.

Another, Swiss-backed, proposal has been for Iran to run centrifuge enrichment machines empty while negotiations proceed, rather than feed them with uranium for enrichment.

But Western diplomats and analysts have said there is no technological means to guarantee a cap on enrichment levels, while the Swiss-backed proposal is unacceptable as it would still let Iran gain expertise running centrifuges.

ElBaradei has cited intelligence estimates that Iran remains four to eight years away from mastering the means to assemble an atom bomb, assuming it wants one.

Washington has not ruled out military action but says it is seeking a diplomatic solution, not planning a war.

Larijani, echoing other Iranian leaders, said Washington would pay dearly if it attacked Iran.

"If they are inclined to engage in a boxing match, they will have problems of their own. But if they are willing to sit down at a chess match, both sides could come to a negotiated result."

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