TEHRAN - Iran on Tuesday exulted at a U.S. intelligence report contradicting earlier Bush administration assertions it was building an atomic bomb, but President George W. Bush said Iran remained dangerous and international pressure should continue.

The U.S. 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 program.

Iran said the report vindicated its long-standing assertion that its nuclear program had only peaceful civilian aims.

"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 that Tehran had halted its nuclear weapons program 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 on 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, while 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 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 program: "Iran was dangerous. Iran is dangerous. And Iran will be dangerous if they have the knowledge necessary to make a nuclear weapon."

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

FRANCE BACKS SANCTIONS

France took a similar stand. "We must keep up the pressure on Iran ... we will continue to work on the introduction of restrictive measures in the framework of the United Nations," a French foreign ministry spokeswoman said.

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.

Two U.N. sanctions resolutions have been passed so far against Iran, unanimously but after diplomatic wrangling among the five permanent U.N. Security Council members -- the United States, China, Russia, France and Britain -- plus Germany.

Close U.S. ally Israel 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 regardless.

Israeli Defence Minister Ehud Barak told Army Radio as far as Israel knew Iran had probably renewed its weapons program since 2003. Israel is believed to have the only nuclear arsenal in the Middle East, although it has not confirmed that.

The head of the Vienna-based U.N. nuclear watchdog said the report should help ease the standoff and prompt Iran to cooperate fully with the agency.

"This new assessment by the U.S. should help to defuse the current crisis," IAEA Director General Mohamed ElBaradei said in a statement, referring to heightened U.S. rhetoric that suggested Bush was considering military action.

A western diplomat in Vienna told Reuters: "The report shows that the dual approach -- exerting pressure on one hand while offering possibilities of a cooperation on the other -- has not been entirely unsuccessful."

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 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 Iran's chief negotiator, Saeed Jalili, in opening remarks at their meeting. "We expect that all your nuclear programs 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.

Senate Majority Leader Harry Reid, among senior Democrats who had requested the updated intelligence assessment, called for a top-to-bottom review of Iran policy.

"President Bush's heated rhetoric on Iran, including comments about a potential World War Three, is even more outrageous now that we know the intelligence community had informed him that it believes Iran had stopped its nuclear weapons program four years ago," Reid said.