The UN nuclear watchdog?s board of governors began a crisis session yesterday to decide whether to report Iran to the UN Security Council over fears that it is secretly trying to build atomic bombs.

With diplomats forecasting passage of a resolution, agreed by the council?s five permanent members, to send Iran?s case to New York, Iran threatened to respond by halting UN spot checks of its atomic sites and pursuing wide-scale uranium enrichment.

But U.S. and European Union leaders, in a nod to Russian, Chinese and developing world concerns, said Security Council involvement did not signal an end to diplomacy or mean that Iran would necessarily face punitive sanctions.

The United States and its European allies persuaded Russia and China this week to back reporting Iran to the council after Tehran stripped IAEA seals from nuclear equipment on January 9, breaking a 2 1/2-year moratorium on atomic development activity.

<B>Diplomacy not over</B>

But the rare show of unity emerged only after Washington and the EU negotiating trio of Britain, France and Germany agreed the council would not act against Iran until after the IAEA?s director reports to the agency?s regular meeting on March 6.

This would allow time for Russia and Iran to work on details of Moscow?s offer to purify uranium for Tehran, a joint venture aimed at preventing diversion of nuclear fuel to bomb-making.

?We seek to support the ongoing IAEA efforts with the weight of Security Council authority. We seek a carefully calibrated approach in which the Council applies escalating measures on Iran?s regime?, U.S. Ambassador Gregory Schulte told the board. ?By reporting Iran to the Security Council, we will increase the diplomatic tools available to the international community. Let me be clear: we are not now seeking sanctions or other punitive measures against Iran?, he said.

Speaking on behalf of EU powers, German Ambassador Herbert Honsowitz said Security Council engagement didnot mean that diplomacy on Iran, frozen by the EU last month, was over.

?This is not about the IAEA transferring its responsibility to the Security Council; it?s about the credibility of the NPT ... and the authority of the IAEA and its decision?, he said. ?This is not about abandoning diplomatic efforts ... Now is not the time for Iranian threats to unilaterally end cooperation with the agency in breach of its obligations. The need is for Iran to create conditions for resumption of negotiations.?

That meant reversing its announced resumption of nuclear fuel research and some uranium enrichment, which broke a moratorium agreed with the Europeans, Western officials said.

?We do not object to informing the Security Council about the work carried out by the IAEA on Iran, Russian Ambassador Grigory Ber?, Dennikov told reporters. ?At the same time the Council should not take any measures at the current stage. IAEA (investigations) have made progress, but not enough to reach a definite conclusion.?

Russia and China have balked at Western calls to get tough with Iran because both have lucrative energy and trade interests at stake. Moscow is building Iran?s first nuclear power reactor.

<B>One more month to resolve suspicions</B>

The compromise among big powers was struck to win over IAEA board members, mainly a large bloc of developing nations, which, like Moscow and Beijing, wanted to give Iran at least another month to resolve suspicions about its nuclear intentions.

The Islamic Republic, which says it wants civilian nuclear energy not bombs, kept up its defiance as the IAEA meeting neared. Its growing missile arsenal and its president?s calls for the destruction of Israel have fueled Western alarm.

Iran has said that under a recently enacted law it must resume uranium enrichment and end IAEA snap inspections of nuclear facilities, if reported to the Security Council.

Iranian President Mahmoud Ahmadinejad said an IAEA vote to refer Iran?s dossier to the council would do no good.

?Today, some big powers are thinking about creating obstacles for Iran?s nuclear research and peaceful activities, but I am announcing to them ... that nuclear energy is our absolute right and we will never step back from our right?, he said on yesterday, Iran?s official IRNA news agency reported.

Mark HEINRICH

Francois MURPHY</B>

<B>Military force an option against terrorists</B>

German Chancellor Angela Merkel said military force can be used as a ?last option? in the fight against terrorism and warned Iran not to curtail cooperation with the UN?s nuclear watchdog. Merkel appeared to increase pressure on Iran just hours before a decision is to be taken on whether to report the country to the UN Security Council over its disputed nuclear program.

?The fight against terrorism requires the mobilization of all political, economic and, when necessary as a last option, military means ? whenever possible under the umbrella of the United Nations?, Merkel said. Later in the speech she urged Iran not to cut back on cooperation with the UN?s International Atomic Energy Agency (IAEA) if Tehran is reported to the Security Council over Western fears that it is developing atomic weapons. ?I can only warn Iran not to pull away from the international community and the IAEA?, she said. ?We have been following with great concern Iran?s recent escalation of the dispute over its nuclear program into a crisis.?

Members of the 35-nation IAEA met in Vienna yesterday to discuss what action to take on Iran, which insists it only has a civilian nuclear program. They are likely to send Iran?s case to the Security Council but delay any action there, such as sanctions, by a month to allow more time for diplomacy.

On Saturday an Iranian military leader said Iran could launch medium-range missiles in the event of an attack on its nuclear facilities. Iran?s President Mahmoud Ahmadinejad has called for Israel to be ?wiped off the map? and has cast doubt on the Holocaust, when six million Jews were killed by the Nazis. Merkel has repeatedly condemned Ahmadinejad for his remarks.

Unlike French President Jacques Chirac, who said recently that nuclear weapons could be used against terrorist states, Merkel appeared to refer only to conventional force when she talked generally of military action against terrorists.

The use of German troops abroad has been an extremely sensitive topic in Germany since the end of World War Two. Many Germans are opposed to participation in foreign military operations. Germany began sending combat troops to participate in peacekeeping missions in the late 1990s.

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