By Michael Shields
VIENNA, May 29 (Reuters) - The U.N. nuclear watchdog said on Friday it had made incremental progress but no breakthrough in its inquiry into whether Iran may have researched an atom bomb, a sobering message that may dim chances for a deal between Tehran and big powers next month.
Diplomats view Iran's reluctance to open up to investigators from the International Atomic Energy Agency as a sign of its reluctance to cooperate fully until punitive sanctions imposed on it are lifted as part of any settlement with the powers.
A confidential, quarterly report issued by the IAEA said the Islamic Republic had provided some information about one of two open items in the investigation into possible military dimensions to its nuclear energy program
"The Agency and Iran agreed to continue the dialog on these practical measures and to meet again in the near future," said the report, which was obtained by Reuters.
A diplomat familiar with the IAEA's update played down the development. He described as "useful" and "relevant" the information Iran had provided on computer modeling that might be used in bomb research, but this did not go far enough.
"It is a positive sign but it is limited because it is only some information. I wouldn't be drawing any major conclusions yet," he said, adding that progress on the issue had actually slowed down although not stopped.
The IAEA report was issued to the U.N. agency's member states with Tehran and six world powers striving to nail down final terms of an accord on curbing its disputed nuclear program in exchange for relief from sanctions crippling the OPEC member country's oil-based economy.
The seven countries have set themselves a deadline of June 30 but that is showing signs of slipping.
DISPUTE OVER TIMING OF SANCTIONS RELIEF
Among the issues holding up a settlement is Iran's demand that sanctions be rescinded immediately after a deal is clinched against the powers' insistence they can be lifted only in phases depending on Tehran's compliance with the terms.
The Vienna-based IAEA also said it remained vital that Iran respond to the agency's questions on and access to the Parchin military base, where Western officials suspect Tehran conducted explosives tests relevant to nuclear bombs.
The Islamic Republic denies this and has long maintained that it is enriching uranium only for electricity and medical isotopes rather than to develop a nuclear bomb capability in secret as the West has suspected.
"The (IAEA) remains ready to accelerate the resolution of all outstanding issues under the Framework for Cooperation. This can be realized by increased cooperation by Iran and by the timely provision of access to all relevant information, documentation, sites, material and personnel in Iran as requested by the agency," the report said.
The United States said it is not considering negotiating beyond the end-June deadline despite comments from France and Iran indicating there was some room to do so.
U.S. Secretary of State John Kerry is to reconvene with Iranian counterpart Mohammed Javad Zarif in Geneva on Saturday. The lead U.S. negotiator, Wendy Sherman, flew to Vienna on Wednesday for talks among Iran and the powers and will join Kerry in Geneva before resuming talks in the Austrian capital.
The deal sought by the powers would have Iran accept limits to its uranium enrichment capacity and open up to unfettered IAEA inspections to help ensure it could not put its nuclear program to developing bombs. They also want Iran to resolve all IAEA questions to build trust in its nuclear aspirations.
A tentative agreement was reached between Iran, the United States, France, Britain, Germany, Russia and China on April 2.
But pivotal issues remain unresolved, including the pace of easing Western sanctions and the extent of monitoring and verification measures to ensure Iran honors any agreement.
Iran has ruled out any nuclear inspector access to its military bases, a position rejected by the Western powers. (Editing by Mark Heinrich)