IAEA chief Yukiya Amano issued a factual but harsh report last week in which the agency for the first time voiced concern about possible ongoing work on nuclear weapons, rather than about past activities.
'I think that certain countries will deliver much tougher statements and will threaten sanctions,' a European diplomat said of the Vienna meeting of the Board of Governors, on which 35 IAEA member countries are represented.
US Secretary of State Hillary Rodham Clinton on Wednesday was the latest Western leader to talk about seeking additional punitive measures, in addition to the three rounds already passed by the UN Security Council in New York.
She said she had made progress with getting Russia's support, while China has so far proven harder to convince because of its dependence on Iranian oil.
In November, the IAEA board adopted a resolution censuring Iran for secretly building a second uranium enrichment plant at Fordow in defiance of the Security Council's orders to halt such activities.
Iran has taken a series of provocative steps since then. President Mahmoud Ahmadinejad has announced plans to build ten more enrichment plants. He also ordered to boost uranium enrichment to a higher level of nearly 20 per cent. Experts say that this brings Iran technically closer to building a nuclear weapon.
Amano's report also showed that Tehran's leaders continue to refuse IAEA inspectors access to some officials, locations and information related to various nuclear activities.
But diplomats said the board would not issue another resolution, but would let the Security Council take over instead.
'One has to show that one is ready to move forward, even if it takes time,' the European diplomat said, referring to the protracted negotiations that preceded earlier sanctions.
The board is also expected to raise the issue of the IAEA proposal to provide foreign-made nuclear fuel for an Iranian medical-use reactor, with Iran shipping out enriched uranium out of the country in return.
Iran started the process of making this fuel itself by enriching to 20 per cent earlier this month, rather than agreeing to the deal drafted in October.
As Iran continues to enriching, 'the deal is not dead, but it is a deal that has a rapidly decreasing half-life,' a senior Western diplomat said.
Iran's ambassador at the IAEA, Ali Asghar Soltanieh, sent a letter to Amano last week in which he proposed instead to simultaneously swap the fuel for the reactor with Iran's uranium on Iranian soil.
But diplomats in Vienna said that this was not acceptable. In the original draft, Iran would let go of its nuclear material for a year while Russia and France turn it into fuel, building mutual confidence and opening a time frame for wider-ranging Iranian talks with world powers.
This time element was missing from Soltanieh's proposal of a simultaneous swap.
Besides Iran, the IAEA board was also set to discuss the IAEA's findings of uranium particles in Syria, which could point to a secret nuclear programme. But board members said they would not seek to pass a resolution while the IAEA was still making efforts to win Syria's cooperation.
