VIENNA (Reuters) - Iran has considerably slowed down the expansion of its contested uranium enrichment program, said a confidential International Atomic Energy Agency report obtained by Reuters on Thursday.

The U.N. watchdog said Iran had increased the number of centrifuges refining uranium, a process that can produce fuel for civilian energy or potentially for atom bombs, by only 164 from 3,800 in November, an insignificant change.

The report also said Iran had refused to let IAEA inspectors conduct a design check at its Arak heavy water reactor project in January and had built a dome over it, preventing satellites from taking images of the facility.

More broadly, the report said Iran was still boycotting IAEA investigators looking into intelligence allegations of past covert atom bomb work by Tehran, with the silent stalemate now more than six months old.

As long as Iran continued to withhold documentation, permission to interview relevant Iranian officials and visits to sites in question, it said, the IAEA would be unable to verify whether Iranian nuclear activity was peaceful or not.

OBAMA POLICY

Progress in the IAEA inquiry, which Iran regards as unjust and driven by American pressure, looks unlikely before Iran sees what new U.S. President Barack Obama has to offer under his stated policy of engagement with foes.

But there is no time to lose since Iran could gain a latent bombmaking ability within a year, Western diplomats say.

Iran says it is producing nuclear fuel only for civil nuclear energy. Western powers suspect otherwise due to Iran's record of nuclear secrecy and restrictions on IAEA inspections.

The IAEA report said aside from the 3,964 centrifuges actively enriching uranium, another 1,450 were undergoing vacuum -- dry run -- tests without nuclear material in them and 125 more had been installed but remained stationary.

Iran had accumulated 839 kg of low-enriched uranium verified by inspectors and told the IAEA this month it had added another 171 kg. Western nuclear analysts estimate anywhere from 1,000 to 1,700 kg would be needed as a basis for conversion into high-enriched uranium suitable for one bomb, if Iran so chose.

IAEA Director-General Mohamed ElBaradei said on Tuesday that Iran had not added as many centrifuges recently as it could have and the reason was probably political rather than technical.

He was alluding to perceptions Iran may want to give Obama political cover for talks, not provoke harsher U.N. sanctions over its refusal to suspend enrichment, a technology that can yield fuel for nuclear power plants or, potentially, bombs.

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