The Associated Press reported on Friday that inspectors have found traces of uranium enriched at an Iranian site to a level that is slightly closer to the threshold needed to arm nuclear missiles. The announcement was made by the UN’s nuclear agency.

According to the report by the International Atomic Energy Agency (IAEA), Iran said the find was a technical glitch. The agency said it was assessing that explanation and has asked for more details, but analysts and diplomats said Iran’s version sounded plausible.

The news comes a day after Iran and six world powers meeting in Baghdad found they were still far apart over how to oversee Tehran’s atomic program, but scheduled more talks in Moscow next month, as an alternative to possible military action.

Iran is under several rounds of UN sanctions for its failure to disclose information on its controversial nuclear program. Tehran says it is enriching uranium to provide more nuclear energy for its growing population, while the U.S. and Israel fear that Iran doing that so it can later make nuclear weapons.

In its report, the nuclear agency said its experts have found particles enriched up to 27 percent at the Fordo enrichment plant in central Iran.

AP noted that is still substantially below the 90-percent level needed to make the fissile core of nuclear arms, but it is above Iran’s highest-known enrichment grade, which is close to 20 percent and can be turned into weapons-grade material much more quickly than the Islamic Republic’s main stockpile.

Several diplomats told AP the find did not necessarily mean that Iran was covertly raising its enrichment threshold toward weapons-grade level. They said the centrifuges that produce enriched uranium could have over-enriched at the start as technicians adjusted their output.

According to David Albright of the Washington-based Institute for Science and International Security, said a new configuration at Fordo means it tends to “overshoot 20 percent” at the start.

“Nonetheless, embarrassing for Iran,” Albright told AP.

The Islamic Republic admitted last year it was moving more centrifuge machines for enriching uranium to the underground Fordo facility, which is carved into a mountain to protect it against possible attacks.

The existence of the facility near Qom only came to light after it was identified by Western intelligence agencies in September 2009. The UN’s nuclear watchdog has confirmed that Iran begun enriching uranium at the plant.

U.S. Secretary of State Hillary Clinton said Friday that “significant differences” remain over Iran’s nuclear program following two days of talks in Baghdad.

Clinton said the P5+1 – the five permanent members of the Security Council plus Germany – presented Tehran with a detailed proposal on all aspects of Iran’s uranium enrichment during this week’s talks in Baghdad.

Iran, she added, put forth its own ideas, and significant differences remain.