Bush administration officials reacted cautiously Tuesday to indications that Iran has improved its ability to enrich uranium as fuel for nuclear reactors, a crucial step toward nuclear weapons.

White House and State Department officials say they still believe diplomacy can persuade Iran to freeze its program before it has mastered the complex technology involved.

The International Atomic Energy Agency will report to the United Nations Security Council next week on Iran's apparent progress. The Tehran regime has defied U.N. resolutions demanding an immediate suspension of its nuclear enrichment program, and another negative report by the nuclear watchdog agency is almost certain to spur a new round of U.N. sanctions.

Top IAEA officials suggested that Iran's engineers had achieved significant progress since early this year. The officials indicated that Tehran had overcome several technical challenges that hampered operation of centrifuges in the fuel enrichment plant at Natanz, Iran's main nuclear facility.

Mohamed ElBaradei, director of the IAEA, said that the goal of a suspension — preventing Tehran from gaining knowledge about enrichment — had been overtaken by events.

"We believe they pretty much have the knowledge about how to enrich," ElBaradei told the New York Times on Tuesday. "From now on, it is simply a question of perfecting that knowledge. People will not like to hear it, but that's a fact."

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