The U.N. atomic watchdog agency on Thursday approved a deal that exempts Saudi Arabia (search) from nuclear inspections, despite having misgivings that in an era of heightened proliferation fears the arrangement should no longer be applied.

Although the Saudis resisted Western pressure to compromise and allow some form of monitoring, the board of the International Atomic Energy Agency (search) had no choice but to allow it to sign on to the IAEA agreement.

Called the small quantities protocol, the deal allows countries whose nuclear equipment or activities are thought to be below a minimum threshold to submit a declaration instead of undergoing inspection.

There is little concern the Saudis are trying to make nuclear arms, but diplomats accredited to the meeting said Riyadh's resistance to inspections was disconcerting at a time of increased fears countries or terrorists might be interested in acquiring such weapons.

With the deal approved, delegates focused on a report on Iran, to be presented later Thursday to the closed board meeting and made available ahead of delivery to The Associated Press.

It says Iran has acknowledged working with small amounts of plutonium, a possible nuclear arms component, for years longer than it had originally admitted and receiving sensitive technology that can be used as part of a weapons program earlier than it initially said it did.

The Saudis insist they have no plans to develop nuclear arms — and no facilities or nuclear stocks that warrant inspection.

As such, they qualify for the protocol, which has been implemented by 75 nations, most of them small and in politically stable parts of the world and which leaves the agency with little choice but to accept the word of nations involved that they have nothing to inspect.

But the timing of the deal for the Saudis comes amid persistent tensions in the Middle East and concern about Iran's nuclear ambitions. It also coincides with an agency push to tighten or rescind the protocol, as suggested in a confidential IAEA document prepared for the board and also made available to AP on Tuesday.

While the Saudi government insists it has no interest in nuclear arms, in the past two decades it has been linked to prewar Iraq's nuclear program and to the Pakistani nuclear black marketeer A.Q. Khan (search).

It also has expressed interest in Pakistani missiles capable of carrying nuclear warheads, and Saudi officials reportedly discussed pursuing the nuclear option as a deterrent in the volatile Middle East.

The Saudis have resisted pressure from the United States, the European Union and Australia to either back away from the small quantities protocol or agree to inspections, as reflected by a confidential EU briefing memo given the AP earlier this week by a diplomat accredited to the agency who insisted on anonymity because he was not authorized to release it.

It quoted the Saudi deputy foreign affairs minister, Prince Turki bin Mohammed bin Saud al-Kabira, as telling EU officials in Riyadh that his country would be "willing to provide additional information" to the IAEA "only if all other parties" to the protocol did the same.

Diplomats inside Thursday's closed meeting said the Saudis repeated those conditions as part of debate over their deal.

The report on Iran does not prove or disprove that Tehran had weapons ambitions. But its details are significant as the agency tries to piece together the puzzle of nearly 18 years of a clandestine nuclear program first revealed in February 2002.

The IAEA first said that Iran produced small amounts of plutonium as part of covert nuclear activities in November 2003.

The agency has not linked the laboratory-scale experiments to weapons, nor has it done so for other parts of the program — including ambitious efforts to be able to enrich uranium. But it criticized Tehran for not voluntarily revealing its plutonium work and other activities that could be linked to interest in making nuclear arms.

Plutonium can be used in nuclear weapons but it also has uses in peaceful programs to generate power — which is what Iran says is the sole purpose of its nuclear activities.

The document says that while Iran had said its plutonium experiments were conducted in 1993 "and that no plutonium had been separated since then," Iranian officials revealed two months ago that there had been linked experiments in 1995 and 1998.