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VIENNA (Reuters) - Iran has cut its most sensitive nuclear stockpile by around 80 percent under an interim pact with world powers and has begun engaging with a long-stalled IAEA investigation into suspected weapons research, the U.N. atomic watchdog said on Friday.
The findings, in a quarterly report by the International Atomic Energy Agency, are likely to be welcomed by the six powers trying to negotiate a long-term deal with Iran on ending a decade-old dispute over its nuclear program and dispelling fears of a new war in the Middle East.
Diplomats and analysts caution, however, that the positions of Iran and the United States, France, Britain, Germany, Russia and China remain far apart and that a successful outcome of their diplomatic efforts is far from certain.
Iran rejects Western allegations that it has been trying to develop the capability to build nuclear weapons. But it has offered to work with the IAEA to resolve its concerns after pragmatist President Hassan Rouhani won office last year on a platform to end the Islamic Republic's isolation.
The IAEA, which has a pivotal role in verifying that Iran is living up to its part of the six-month accord reached in November, made clear that Iran so far is undertaking the agreed steps to curb its nuclear program.
Under the breakthrough agreement that took effect on January 20, Iran halted some aspects of its nuclear program in exchange for a limited easing of international sanctions that have laid low the major oil producer's economy. It was designed to buy time for talks on a final deal that began in February.
The IAEA report showed that Iran since January had acted to reduce its stockpile of higher-grade enriched uranium gas - a relatively short technical step away from weapons-grade material - by just under 82 percent.
The amount that remains after most of the material was either converted or diluted to less proliferation-prone forms - under 40 kg - is far below the 250 kg which experts say is needed for one bomb.
On another closely watched aspect of Iran's nuclear activities, the report said Iran at a meeting in Tehran this week had shown the IAEA information that simultaneous firing of a type of detonator was tested for a civilian application.
The IAEA, which for years has been trying to investigate allegations that Iran may have worked on designing a nuclear bomb, had asked for explanations about the development of Exploding Bridge Wire (EBW) detonators as part of its probe.
How Iran responds to the U.N. agency's questions is seen as an important test of its readiness to cooperate with the investigation into what the IAEA calls the possible military dimensions (PMD) of the country's nuclear program.
"This is the first time that Iran has engaged in a technical exchange with the agency on this or any other of the outstanding issues ... since 2008," the report said. "The agency's assessment of the information provided by Iran is ongoing."
A senior diplomat familiar with the inquiry said Iran's cooperation "has been improving all the time".
Iran agreed at the May 20 meeting in the Iranian capital to address two other issues that are part of the IAEA's investigation by late August, a potentially important step forward for the agency's efforts to look into the allegations.
Western diplomats say Iran must do much more to fully address the IAEA's suspicions, and provide faster cooperation.
Friday's report said the U.N. watchdog was still not in "a position to provide credible assurance about the absence of undeclared nuclear material and activities in Iran".
Nevertheless, Iran expert Ali Vaez described the IAEA's latest quarterly report as one of its "most positive ... on Iran's nuclear program in the past few years". Vaez, of the International Crisis Group think-tank, added: "When it gets to a sensitive issue like PMD, one step at a time is good walking".
Iran's discussions with the IAEA are separate from its talks with the powers, but both are aimed at ensuring that it does not develop nuclear weapons. The United States and Israel, itself believed to be nuclear-armed, have not ruled out military action against Iran if diplomacy fails to resolve the standoff.
After years of confrontation with the West under Rouhani's hardline predecessor, Mahmoud Ahmadinejad, Iran and the powers aim to reach a final agreement by July 20.
But the latest round of negotiations failed to make much headway last week, raising doubts over the prospects for a breakthrough by late July. The powers want Iran to sharply scale back its nuclear program, but Iran resists that demand.
Editing by Andrew Roche