Vienna, Austria ? The U.N. nuclear watchdog expressed “serious concern” Thursday over Iran’s resumption of nuclear activities that could lead to an atomic bomb, and diplomats said Tehran faced a September deadline to stop uranium conversion at a plant in central Iran.

The Iranians resumed work at the nuclear facility in Isfahan earlier this week, despite appeals from European negotiators to maintain a voluntary suspension of nuclear activities.

Diplomats, who spoke on condition of anonymity because they were not authorized to be quoted, made clear that insufficient progress by Sept. 3 could lead the board to consider reporting Iran to the U.N. Security Council, which has the power to slap the regime with crippling sanctions.

The International Atomic Energy Agency’s 35-nation board of directors adopted a resolution that said “outstanding issues relating to Iran’s nuclear program have yet to be resolved.”

But it did not mention reporting the regime to the Security Council amid concerns such a move could backfire by hardening Iran’s position. Iran already had said it would rather endure sanctions than back down on a program it says is a matter of national pride.

President Bush, meeting at his Texas ranch with members of his foreign policy team, welcomed the IAEA’s warning to Tehran about the consequences of its nuclear ambitions. He also indicated that new Iranian President Mahmoud Ahmadinejad will receive a U.S. visa to attend an annual United Nations gathering next month in New York.

Iran, which insists its nuclear program is peaceful and geared only toward producing electricity, was defiant.

Iranian officials broke the IAEA seals on its conversion equipment at its nuclear plant at Isfahan on Wednesday and resumed full operation.