Iran announced Monday it has suspended uranium enrichment (search), and the head of the U.N. nuclear watchdog agency said he believed all Iran's enrichment activities have stopped, the central part of an agreement with Europe designed to head off possible U.N. sanctions.

The suspension fulfills a pledge Iran made earlier this month and came days ahead of a key meeting of the agency's board to judge Tehran's compliance with the agency's investigation into nearly two decades of hidden nuclear activities.

If the International Atomic Energy Agency (search) rules that Iran is honoring its commitment to suspend enrichment, it will be a setback to U.S. hopes of referring Iran to the U.N. Security Council, a step that could lead to sanctions.

Iranian state-run radio made a brief announcement of the suspension Monday, saying it aimed "to build confidence." The suspension included the building of centrifuges used in enrichment and the reprocessing of uranium into the gas spun in the machines.

In Vienna, IAEA head Mohamed ElBaradei (search) said the suspension appeared to be confirmed. "I think pretty much everything has come to a halt," he told reporters.

He said he expected to have a definitive ruling by Thursday on whether Iran has honored the pledge made earlier this month to freeze all activities related to enrichment, a process that can be used in energy programs or to make nuclear weapons.

The United States, which has led the campaign for a harder line on Iraq, accusing it of seeking nuclear weapons, will reserve judgement on the authenticity of the suspension until the IAEA board meeting on Thursday, White House spokesman Scott McClellan said.

"Iran's nuclear program remains a real concern to the international community," McClellan said.

The European Union underlined that Iran must offer proof of the halt before European counrties will fulfill their side of the deal — closer economic and political ties.

Dutch Foreign Minister Ben Bot said "a precondition for further discussion with Iran for a Political Cooperation Agreement is verification" that Tehran has stopped enriching uranium.

EU foreign ministers meeting in Brussels released a statement saying Iran would have to sustain the suspension if Europe is go ahead and craft a trade agreement.

Iran has been under intense pressure to freeze the activities as a way of reducing international suspicions over its nuclear program.

The United States accuses Iran of secretly pursuing nuclear weapons. Secretary of State Colin Powell said last week that Washington has intelligence indicating Iran is trying to fit missiles to carry nuclear weapons.

Iran, which insists its program is peaceful, has said the suspension will be brief, voluntary, and contingent on what Europe does next.

"Continued suspension will depend on the other side fulfilling its promises. The upcoming IAEA board meeting will be a test," government spokesman Abdollah Ramezanzadeh said Monday.

Britain made clear it also would watch closely for implementation of the deal.

"What we are looking forward to is a translation of that text into an agreement," said British Foreign Secretary Jack Straw.

Straw said that if Iran reneges on the deal, the European Union "reserves the right" to take the country to the United Nations.

Ahead of the board meeting, which opens Thursday, European negotiators said they were working on a draft resolution on Iran that would have no direct reference to Security Council action. But they said the resolution would likely contain an indirect "trigger mechanism" suggesting possible Security Council involvement if Iran breaks its the terms of the suspension deal.

Under Iran's agreement with Britain, France and Germany, the Europeans are to provide economic, technological, security and nuclear cooperation with Iran. Tehran portrays the agreement as European support for what it sees as its right to pursue a peaceful nuclear program.

Iranian hard-liners have accused the government of sacrificing Iran's rights by agreeing to suspend enrichment, an activity that is not prohibited under the Nuclear Nonproliferation Treaty.

Monday's announcement that enrichment had been stopped came just days after revelations that Iran was aggressively producing significant quantities of uranium hexafluoride — the feedstock for enrichment.

When introduced into centrifuges and spun, the substance can be enriched to varying degrees. Low-grade enriched uranium is used in nuclear power plants. Highly enriched uranium forms the core of nuclear warheads.

A senior EU diplomat said Iran's decision to carry out uranium processing right up to the freeze deadline disappointed the Europeans and cast doubt on Tehran's goodwill — even if it did not violate the letter of the agreement.

ElBaradei, the U.N. agency head, said Monday he believed the Iranians processed about two tons of raw uranium into the gas in the period leading up to Monday's suspension deadline. A diplomat with nuclear expertise said that amount would be about a quarter of the quantity needed to produce the 50 pounds of weapons-grade uranium for one small nuclear weapon.