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REUTERS - Iran has slowed its nuclear expansion and met some demands for better monitoring but allegations of covert atom bomb research look credible and Tehran must address them, the U.N atomic watchdog said.

The International Atomic Energy Agency report will form the basis for six-power talks on Sept. 2 to look into harsher U.N. sanctions against the Islamic Republic over a uranium enrichment campaign the West fears is a stealthy quest for nuclear weapons.

New Iranian gestures of cooperation with IAEA inspectors could make it harder for the United States and big European allies to persuade Russia and China, major trade partners of Tehran, to agree on steps to squeeze its lifeblood oil sector.