Western diplomats close to the Vienna-based International Atomic Energy Agency, IAEA, say Iran has started to build deep tunnels to store nuclear material at a site where it is known to have carried out uranium enrichment activities.  The disclosure comes as the United States is considering whether to back an approach by three European countries aimed at getting Iran to dismantle its suspected nuclear weapons program by offering commercial incentives to the Islamic Republic.

The diplomats, all of whom asked not to be identified, say there are many unresolved questions about Iran's nuclear program.

First among those questions is why Iran is building tunnels as much as one kilometer deep at its main uranium enrichment facility near Isfahan and why did it not inform the IAEA about such activity.

One diplomat says he thinks the reason for the tunneling is to hide and protect nuclear components that have been stored there.

Another diplomat says he suspects the tunnels and the use of reinforced construction materials at the site are meant to make the facility resistant to attack by Israel or the United States, which have accused Iran of trying to build nuclear weapons.  Iran denies that, saying it wants to use nuclear energy to generate electricity.

But the diplomats have other concerns.  They say satellite images indicate that Iran has begun construction work on a research reactor at Arak, southwest of Teheran, which one diplomat says could be used to produce bomb-grade plutonium.

A third concern, according to this diplomat, is that Iran insists on testing parts for centrifuges, which enrich uranium.  Iran has agreed to temporarily freeze all enrichment activity while it negotiates with Britain, France and Germany on a package of concessions, including support for its membership in the World Trade Organization, WTO, and the sale of commercial aircraft and aircraft spare parts.

The Bush administration, which until now has taken a tough position toward Iran, is studying whether to endorse the European position with the idea that if the negotiations fail, the blame would most likely fall on Iran, which has steadfastly refused to make its freeze on enrichment permanent.  Diplomats say that, if by June there is no progress, the Europeans have indicated that they are prepared to join the United States in referring Iran to the United Nations Security Council for possible sanctions.

On Friday, Iran signaled that membership in the World Trade Organization is not enough of an incentive to get it to end its enrichment program.  Iranian Trade Minister Mohammad Shariatmadari is quoted by an Iranian news agency as saying that joining the WTO would only benefit the United States and the European Union by giving them freer access to the Iranian market.