Powell said he had "a very candid discussion" with EU foreign ministers in Brussels on the issue.

The US wants Iran declared in breach of its nuclear treaty obligations, a move that could lead to UN sanctions.

The EU statement has been submitted to the UN's nuclear watchdog which meets on Thursday to discuss Iran.

Speaking at a news conference in Brussels, Powell said he was pleased that Iran "seems to be moving in the right direction."

But he said the US did not believe that the Iranian government had abandoned all efforts to produce nuclear weapons.

He said the draft text on Iran offered by Britain, France and Germany was not tough enough on Tehran's non-compliance with its treaty obligations.

"We have some reservations ...about whether the resolution is strong enough to convey to the world the difficulties that we have had with Iran over the years," Powell said.

It is clear there were considerable disagreements between the US and the EU over Iran.

Diplomats familiar with the text said that the three European countries had pressed for a softer position which reflected Tehran's agreement to suspend its uranium enrichment programme and accept inspections by the International Atomic Energy Agency (IAEA).

While Washington is pushing for Iran to be reported to the Security Council, the European view is that constructive engagment with Iran should be given a chance to work.

Last week, a report by IAEA inspectors said they had found no evidence that Iran has secretly been developing nuclear weapons.

But they did admonish the Iranian authorities for being secretive.