Apr 17, 6:56 AM EDT

UN report says Iran has neutralized half of its uranium stock closest to nuke-arms grade.

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VIENNA (AP) -- Iran has converted most of a nuclear stockpile that it could have turned quickly into weapons-grade uranium into less volatile forms as part of a deal with six world powers, the U.N. atomic agency reported Thursday.

The development leaves Iran with substantially less of the 20-percent enriched uranium that it would need for a nuclear warhead. Iran denies any interest in atomic arms. But it agreed to some nuclear concessions in exchange for a partial lifting of sanctions crippling its economy under the deal, which took effect in January.

Uranium at 20 percent is only a technical step away from weapons-grade material. By the time the agreement was reached late last year, Iran had amassed nearly 200 kilograms (440 pounds). With further enrichment, that would have yielded almost enough weapons-grade uranium for one atomic bomb.

Under its agreement, Iran agreed to stop enriching to grades beyond 5 percent, the level most commonly used to power reactors. It also committed to neutralizing all its 20-percent stockpile - half by diluting to a grade that is less proliferation-prone and the rest by conversion to oxide used for reactor fuel

In line with information given The Associated Press by diplomats earlier this week, the U.N.'s International Atomic Energy Agency confirmed Thursday that Iran had completed the dilution process.

The confidential IAEA report obtained by the AP also said conversion also was well underway, with over 50 kilograms (110 pounds) of the 20-percent material rendered into oxide.

Iran has until July to fulfill all of its commitments under the deal. But it has to show progress in exchange for sanctions relief, and it is eager to get its hand on the next tranche of some $4.2 billion of oil revenue funds frozen under international sanctions meant to force it into nuclear compromise.

The November agreement between Iran and the six - the United States, Russia, China, Britain, France and Germany - is meant to lead to a comprehensive deal placing long-term caps on Iran's enrichment program and other atomic activities in exchange for full sanctions relief. The two sides hope to reach agreement by July but can extend negotiations if both agree to do so.

Beyond its commitments to neutralize its 20-percent uranium stock, the IAEA report said that Iran also was complying with other obligations under the six-month interim plan, which restricts Tehran from expanding any activities that could be turned toward making a nuclear weapon.

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