Since Hassan Rouhani became president, Iran has stopped expanding its uranium enrichment capacity, a UN inspection report showed on Thursday, in a potential boost for diplomacy to end Teheran's nuclear dispute with the West.

The quarterly report by the International Atomic Energy Agency also said that since August no further major components had been added to a potential plutonium-producing reactor that worries the US and its allies.

It was issued the same week that Iran agreed to give IAEA inspectors access to two nuclear-related facilities as part of a cooperation pact to resolve outstanding issues, including suspicions of nuclear bomb research by Teheran.

The marked slowdown in activities that could lead to developing nuclear bombs may be intended to back up Rouhani's warmer tone toward the West after years of worsening confrontation, and strengthen Teheran's hand in talks with world powers due to resume on Nov 20.

The six powers - the United States, France, Germany, Britain, Russia and China - want Iran to curb its nuclear program to ease fears that it may be seeking to develop nuclear weapons, a charge Teheran denies.

Iran halted a rapid increase in its capacity to refine uranium - which fuel nuclear power plants but also bombs if processed much more - "when their team changed" in August, a senior diplomat familiar with the IAEA report said, referring to Rouhani and his administration.

But Iran still is pressing ahead with its most sensitive nuclear activity, the enrichment of uranium to a fissile concentration of 20 percent, a relatively short technical step away from weapons-grade material, the report showed.

Israeli Prime Minister Benjamin Netanyahu, who opposes any deal with Iran that does not dismantle its entire enrichment program, said he was "not impressed" as the Islamic state did not need to expand its program.

Israel, believed to be the Middle East's sole nuclear-armed power, has long warned it could use force to prevent Iran from gaining such weapons.

The Arak reactor, which Iran previously said it would start up in the first quarter of 2014 but later postponed, is of great concern for Western powers as it could yield weapons-grade plutonium.

France said during talks between Iran and world powers in Geneva last week that Teheran must suspend building Arak.

But the IAEA report showed Iran has "more or less frozen" construction of the heavy water reactor, the diplomat said, making clear he did not believe it would be up and running any time soon: "Major components are missing from the plant."

The quarterly IAEA document was the first that included developments only since Rouhani took office on Aug 3, prompting a diplomatic opening during which Iran and the world powers have made progress toward a possible nuclear accord.

Iran's foreign minister said Friday he is hopeful ahead of next week's negotiations and reiterated Teheran's demand for recognition of what it calls its "nuclear rights".

Mohammad Javad Zarif said in comments carried by the semi-official Fars news agency on Friday that there is no chance for the upcoming round of talks to succeed if the West ignores Iran's demand for formal recognition of its right to enrich uranium.

"Iran has now taken two unilateral steps to show it wants a deal - it has stopped expanding its nuclear program and begun to provide more transparency," said Middle East expert Cliff Kupchan of risk consultancy Eurasia group. This "clever diplomacy" puts the onus on the West to respond, he said.

Iran says the higher-grade enriched uranium is needed to fuel a medical research reactor and says it is refining uranium for peaceful energy. But its refusal to scale back its nuclear program and open it up to unfettered inspections has drawn sanctions that have severely damaged its oil-dependent economy.

Iran installed only four first-generation IR-1 centrifuges at its Natanz plant since August, making a total of 15,240, the IAEA said. In the prior three months, it had put in place 1,800. Not all of the centrifuges are operating.

Rouhani succeeded hardliner Mahmoud Ahmadinejad in August, promising to try to settle the nuclear row and ease sanctions.

Reuters-AP-Xinhua