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VIENNA -- Iran has slowed the installation of centrifuge machines that enrich uranium for its controversial nuclear program, the director of the International Atomic Energy Agency said on Monday.

Western powers have condemned Tehran's expansion of enrichment work in defiance of U.N. demands, suspecting the program is secretly aimed at producing atom bombs, and say they are mulling more sanctions against Tehran.

The Islamic Republic has condemned U.N. Security Council pressure as illegal, insisting its program aims only at generating electricity and vowing to press on no matter what.

But IAEA director Mohamed ElBaradei said agency inspectors who visited Iran's underground enrichment plant at Natanz last week found it was scaling back its expansion in operations.

"We were there last week and we saw a slowing in the process of commissioning new cascades," ElBaradei said, referring to interlinked networks of centrifuges that refine uranium into nuclear fuel.

"Without going into detail you could say that there is a fairly marked slowdown. It is not a full-size freeze, but it is a marked slowdown," ElBaradei told reporters after an IAEA governors meeting.

Last month, he urged Iran to stop installing further centrifuges in return for a "timeout" in seeking further sanctions -- an interim step to ease a standoff with world powers over their demand for a total enrichment shutdown.

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On July 4, Iran ruled out adopting such a timeout but ElBaradei's disclosure suggested a shift by Tehran, although it was unclear whether the slowdown was politically motivated or caused by technical glitches Iran has suffered in the past.

ElBaradei could not say whether the centrifuge slowdown would affect Iran's timetable to have 3,000 centrifuges running by the end of July. That threshold would lay a basis for "industrial scale" enrichment that would heighten the risk of weaponisation.

A series of exploratory talks between Iranian chief negotiator Ali Larijani and EU foreign policy chief Javier Solana have yielded no breakthrough.

But senior IAEA officials will go to Tehran on Tuesday for talks to flesh out a Larijani offer of a "plan of action" to clear up longstanding IAEA questions about the nature of Iran's program, concerns that helped bring about U.N. sanctions.

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