The International Atomic Energy Agency (IAEA) is investigating traces of highly enriched uranium it found at a nuclear research site in Egypt, according to a report.

It did not say whether the particles, which IAEA inspectors found in environmental swipe samples, were enriched to a level high enough for use as fuel for an atom bomb, but that further tests in the vicinity were planned to clarify the matter.

Two diplomats familiar with IAEA inspections said the traces were of uranium enriched over 20 percent but not to the fissile threshold of weaponisation -- about 90 per cent. Older Soviet - and US - built research reactors used in many developing countries run on uranium enriched between 35 and 90 per cent.

The report, an 82-page document reviewing global operations in 2008 to verify compliance with non-proliferation rules, said the highly enriched uranium (HEU) traces were discovered at Egypt's Inshas research reactor complex near Cairo in 2007-08.

Egypt had explained to the IAEA that it believed the HEU "could have been brought into the country through contaminated radio-isotope transport containers", the May 5 report said.

Radio-isotopes are commonly used for agriculture and medicine.

"Although the agency has no indications contrary to Egypt's explanations, it has not yet identified the source of the particles," the report said, and an inquiry would continue.

The HEU was discovered alongside particles of low-enriched uranium (LEU), the type refined by less than 20 percent and typically used for nuclear power station fuel.

The IAEA is on high alert for possible nuclear proliferation in the Middle East given continued inquiries into allegations of secret nuclear fuel work with weapons dimensions in Iran and Syria, something both countries deny, and the 2003 exposure of a covert atomic bomb programme in Libya, since scrapped.

Past IAEA problems with Egypt

In February 2005, an IAEA report chided Egypt for repeatedly failing to declare nuclear sites and materials but said inspectors had found no sign of an atom bomb programme.

At the time, IAEA diplomats said Egypt's breaches appeared minor compared to those of Iran and South Korea, both of which experimented with uranium enrichment and plutonium reprocessing -- technologies applicable to nuclear bomb-making.

The new report said Egypt told the IAEA in 2004 that its atomic energy agency lacked the means to ensure "effective control" over all nuclear work in the country. A presidential decree was issued in 2006 to strengthen the agency's powers.

Egyptian regulators then mounted a state-wide investigation and detected previously undocumented nuclear items. The report said Egypt handed over information about previously undeclared nuclear work and submitted design information about key sites.

Egypt's statements were judged consistent with IAEA findings and there were no more outstanding questions, it said.

In 2007 Egypt said it aimed to build several atomic reactors to meet rising energy demand and has since received nuclear cooperation offers from China, Russia, France and Kazakhstan.

Many Arab states have similar ambitions, to offset high fossil-fuel costs and cut emissions to combat climate change.

Industry analysts have suggested the United States could be willing to help Egypt develop a nuclear programme if it pledged never to enrich uranium or reprocess spent nuclear fuel -- both proliferation-prone processes -- on its own soil.

Egypt ratified the Non-Proliferation Treaty in 1981 but not the IAEA's 1997 Additional Protocol that gives inspectors the right to make intrusive, short-notice inspections of nuclear facilities and other sites not declared as nuclear. – Reuters