TEHRAN - Iran said on Tuesday it felt vindicated by a U.S. intelligence finding that it was not building an atomic bomb, but George W. Bush said Tehran remained dangerous and international pressure should continue.

The National Intelligence Estimate (NIE) published on Monday took U.S. friends and foes by surprise after years of strident rhetoric from Washington accusing Tehran of pursuing a covert nuclear weapons programme.

Iran said the report supported its long-standing assertion that its nuclear programme had only peaceful civilian aims, such as electricity generation.

"It's natural that we welcome it when those countries who in the past have questions and ambiguities about this case ... now amend their views realistically," Foreign Minister Manouchehr Mottaki told state radio.

The report, which said Tehran had halted its nuclear weapons programme in 2003 but was continuing to develop the capacity to enrich uranium, had an immediate impact on moves under way to tighten U.N. sanctions against Tehran.

China, which has a U.N. Security Council veto and agreed only reluctantly to earlier sanctions, said the NIE created new conditions.

"I think we all start from the presumption that now things have changed," China's U.N. Ambassador Guangya Wang said.

France and Britain joined Bush in saying international pressure must be maintained on Iran. Israel, which believes a nuclear Iran could threaten its existence, questioned the report and urged continued pressure on Tehran.

At a news conference in Washington, Bush said the report should in fact be taken as a rallying point for further pressure on Iran and it showed that the approach had been successful in the past.

He said the NIE showed Iran was still developing nuclear technology and could restart a covert weapons programme.

"Iran was dangerous, Iran is dangerous and Iran will be dangerous if they have the knowledge necessary to make a nuclear weapon," Bush said.

U.S. Secretary of State Condoleezza Rice, who has spent years persuading other powers to join in anti-Iranian sanctions, told reporters travelling with her to Africa that she would continue to push for a third U.N. sanctions resolution.

In London, a spokesman for Prime Minister Gordon Brown said the report confirmed Britain had been right to worry about Iran's nuclear ambitions and showed that "the sanctions programme and international pressure were having an effect in that they seem to have abandoned the weaponisation element."

FRANCE BACKS SANCTIONS

France took a similar stand. World powers met last Saturday in Paris to discuss a further round of sanctions over Iran's refusal to halt uranium enrichment, a process that can produce fuel for power plants or, potentially, nuclear weapons.

The two previous U.N. sanctions resolutions against Iran were passed unanimously but after diplomatic wrangling among the five permanent Security Council members -- the United States, China, Russia, France and Britain -- plus Germany.

Israel, a close U.S. ally, was unimpressed by the report and Prime Minister Ehud Olmert called for the U.S.-backed campaign to curb Iran's nuclear ambitions to press ahead.

Israeli Defence Minister Ehud Barak told Army Radio that, as far as Israel knew, Iran had probably renewed its weapons programme since 2003. Israel is believed to have the only nuclear arsenal in the Middle East and does not make its civilian nuclear activities accessible to the U.N. nuclear watchdog.

The head of the Vienna-based International Atomic Energy Agency said the report should help prompt Iran to improve its cooperation with the U.N. watchdog.

"This new assessment by the U.S. should help to defuse the current crisis," IAEA Director General Mohamed ElBaradei said in a statement.

Russia has been wary of harsh sanctions, arguing there is no evidence that Iran has sought to develop nuclear arms. Iran's top nuclear negotiator, Saeed Jalili, met Russian President Vladimir Putin near Moscow on Tuesday.

"We are pleased to note that your contacts with the International Atomic Energy Agency have become more active," Putin told Jalili in opening remarks at their meeting. "We expect that all your nuclear programmes will be transparent and under the control of this respected organization."

Before meeting Jalili, the Russian leader had a 40-minute telephone conversation with Bush in which they discussed Iran, a Putin aide said.

Bush's critics at home seized on the Iran report to attack the Republican administration's Iran policy and urge Bush to engage in more active diplomacy.

Top Democrats seeking the party nomination for next year's presidential election, speaking at a forum in Iowa, accused Bush of "sabre-rattling" over Iran and of undermining U.S. security in the region and its credibility in the world.

"It is absolutely clear that this administration and President Bush continue to not let facts get in the way of his ideology," said Sen. Barack Obama. "And that's been the problem with their foreign policy generally."