Several diplomats said Iran began with a plan of developing its nuclear capabilities so that the atom bomb option would always be there - the "break-out" scenario. Later, one said, Iran decided the only solution to the U.S. threat was the bomb.

"Iranian leaders got together after the Iraq war and decided that the reason North Korea was not attacked was because it has the bomb. Iraq was attacked because it did not," a Western diplomat told Reuters this week, citing intelligence reports.

Iran has vehemently denied pursuing nuclear weapons, arguing that its atomic ambitions are limited to generating electricity and that developing the bomb would violate Islamic law.

Wary of sparking another Iraq-like invasion of a Middle Eastern country, inspectors from the U.N. International Atomic Energy Agency (IAEA) are cautious and say there is still no clear evidence that Tehran wants the bomb.

"We all think the American assessment is probably right because there is no other good explanation for the Iranian activities," a senior international diplomat involved in the investigation of Iran told the New York Times last week.

"But we still don't have the smoking gun," he said, adding that after Iraq "we need smoking guns more than ever."

Uzi Arad, director of Israel's Institute of Policy and Strategy and a former senior official in the Israeli intelligence service, Mossad, disagreed, saying it was time the IAEA stated openly that Iran is pursuing nuclear arms - which it could one day use to destroy the Jewish state.

"Anyone who suggests differently is under illusions," Arad said. "At which point will the IAEA state the obvious?"

A Western diplomat said such caution and conservatism was only giving Iran the time it needed to reach its goal.

"Is this evidence of a weapons program? Or do we need to wheel a nuclear bomb into the IAEA boardroom first?" he asked.

U.S. CHOOSES DIPLOMACY, NOT FORCE

Washington, which is still trying to pacify Iraq, has not threatened Iran with military action and has vowed to deal with the Iranian nuclear program at the United Nations.

For over a year, the United States has tried to pressure the IAEA's 35-nation governing board to report Iran to the U.N. Security Council for hiding its uranium enrichment program from the IAEA for nearly two decades.

Washington says this is a blatant violation of the nuclear Non-Proliferation Treaty (NPT), which Iran signed in 1970. It has also said that Tehran is only trying to drag out the inspection process to buy time as it approaches the bomb.

"Every passing day could bring it closer to producing the enriched uranium needed for nuclear bombs," Kenneth Brill, U.S. ambassador to the IAEA, said last month.

Experts say that once a country has enough fissile uranium, it is only months away from a nuclear weapon.

But the Egyptian-born head of the IAEA, Mohamed ElBaradei, along with the European Union's three biggest states - France, Britain and Germany - have blocked U.S. attempts to send the Iran file to the Security Council for fear of Iran's reaction.

"You are running the risk that the Security Council might not act and therefore the situation would exacerbate. And you run the risk that Iran might opt out of the NPT (Non-Proliferation Treaty) and you have another North Korea," ElBaradei said recently in Israel.

Last year, the IAEA board referred the case of North Korea to the Security Council after Pyongyang expelled all U.N. inspectors from the country on Dec. 31, 2002 and later announced it would leave the NPT. The council did nothing.

Officials from the EU trio agree privately that Tehran appears to be keeping the door open to the bomb and have encouraged Iran to suspend its uranium enrichment program in exchange for a promise of peaceful nuclear technology. So far this has not worked though the "EU three" refuse to give up.

NO "SMOKING GUN"

While it has yet to find any "smoking gun," there is no question that the IAEA has uncovered many things in Iran that would appear to support the U.S view.

For one, Iran already has the ability to produce fissile material for a weapon should it choose to.

Iran has experimented with multiple avenues of enriching uranium - using lasers, as well as different types of centrifuges bought on a black market set up by the founder of Pakistan's nuclear weapons program, Abdul Qadeer Khan.

Also, traces of bomb-grade uranium found inside the country last year have never been adequately explained.

Iranian scientists also experimented with a substance called polonium which can be used to spark a chain reaction in a bomb.

Iran says that its experiments with polonium were not military-related but civilian. But the IAEA cited an absence of information to support Iran's statements in this regard.

Despite their frustration with the IAEA process, officials from the United States and its allies doubt that military strikes on Iranian nuclear facilities would do more than push Tehran's nuclear activities further underground.

This is why they have pushed to report Iran to the Security Council, which can impose unpleasant sanctions to prod Iran to decide that pursuing the nuclear option is not worth it.

There have been hints that Israel, which in 1981 bombed Iraq's Osiraq reactor where it believed Saddam planned to develop atomic weapons, might take similar action in Iran.

"Everything has to be done to stop it," said a senior Israeli official about Iran's possible nuclear arms program. "We are not discussing (a military) option right now. Israel hopes international efforts and pressure can still be brought to bear. This is an issue that concerns the entire world." (Additional reporting by Dan Williams in Jerusalem)