Does today’s report come as a surprise?

No. Iran had made very clear in the past 60 days - the time given for compliance by the United Nations resolution - that it was not going to suspend enrichment of uranium, the most controversial part of its nuclear programme. President Mahmoud Ahmedinejad said so again this week.

But the confidential report from the IAEA to the UN Security Council gives new details. First, that Iran is trying to move from its pilot plant of centrifuges (the trickiest part of the technology) to an "industrial scale" plant of 3,000. It also says that Iran has refused to allow the IAEA to monitor the new plant under construction with remote-controlled cameras, which will be a violation of its obligations under the Nuclear Non-Proliferation Treaty once it has more than 500 centrifuges.

The report showed that Iran had not given the IAEA any new answers to outstanding questions, such as the source of traces of weapons-grade uranium in its plants, nor on allegations of military involvement. Iran maintains it wants to master enrichment to make fuel for nuclear power stations, but other governments fear that it wants to master the techniques to make nuclear weapons.

What action is the Security Council now likely to take?

It may toughen the limited sanctions it imposed on Iran in December, which included a ban on travel for some Iranian officials, and a ban on trade in some sensitive goods, particularly those related to the weapons or energy industries. The US, which has slapped its own sanctions on dealings with some Iranian banks and companies, is pressing the EU to join, and will try to get Security Council support for this escalation.

However, Russia has been one obstacle; it secured an exemption from the December sanctions to allow it to continue building Iran's first nuclear reactor at Bushehr. Yet in the past week, it has alleged that Iran is late in its payments - something Iran denies. Western officials have wondered whether this is an excuse for a delay in supplying the fuel to run the reactor, which is really prompted by Russia's own unease about Iran's intentions. If so, Russia might be more amenable to supporting wider sanctions. But this must be only a faint hope, given Russia's recent obstreperousness in dealing with the West.

Some European countries - notably Italy and Germany - have close trading links with Iran and might not be too happy either about an extension of sanctions, although they have been able to escape being pressed on the point, as Russia's obduracy has taken the diplomatic heat.

What can we expect if diplomacy fails?

More sanctions, followed after a pause, by more diplomacy. For all the talk about a US military strike on Iran, particularly from those close to the office of US Vice-President Dick Cheney, it seems highly unlikely that the US would contemplate this.

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