"We'll have to watch very carefully," said Bush. "They have, in the past, said they would adhere to international norms and then were caught enriching uranium. And that's dangerous."

Speaking one day after the Islamic republic resumed sensitive nuclear activities, Bush warned of possible UN sanctions on Iran if negotiations with Britain, France and Germany fail to ease fears Tehran seeks atomic weapons.

"We will work with them in terms of what consequences there may be, and certainly the United Nations is a potential consequence," the president told reporters on his ranch near this tiny town.

Bush took note of media reports that Iranian President Mahmood Ahmadinejad had expressed a willingness to resume negotiations with Europe, which have been teetering on the brink of collapse.

"If he did say that, I think that's a positive sign that the Iranians are getting the message, that it's not just the United States that's worried about their nuclear programs, but the Europeans are serious in calling the Iranians to account and negotiating," Bush said.

"We've condemned strongly Iranians' attempt to develop any kind of program that would allow them to enrich uranium to develop a weapon," he said. "We're very deeply suspicious of their desires."

Washington accuses Tehran of using a civilian nuclear program as cover for a quest for atomic weapons. Iran denies the charge.

Separately, US Defense Secretary Donalf Rumsfeld accused Iran of allowing weapons to be smuggled across its border into Iraq, where US forces face a deadly insurgency, and warned that "ultimately, it's a problem for Iran."

US intelligence believes that a cache of newly manufactured Iranian bombs discovered about two weeks ago in northeastern Iraq came from the Iranian Revolutionary Guard, a US intelligence official told AFP.

"It is true that weapons clearly, unambiguously from Iran have been found in Iraq," said Rumsfeld, who told reporters he did not known whether there was official Iranian involvement.

But he added: "It's a big border and unhelpful for Iranians to be allowing weapons of those types to be crossing the border."

"It's a problem for the Iraqi government. It's a problem for the coalition forces. It's a problem for the international community. And ultimately, it's a problem for Iran," he said.

Earlier, the Iranian student agency ISNA quoted Ahmadinejad as telling UN chief Kofi Annan in a telephone conversation on Monday that Tehran was prepared to resume talks, albeit with "new propositions" to be unveiled shortly.

But the Iranian leader described a European offer of nuclear, commercial and political cooperation in exchange for Iran renouncing ultra-sensitive nuclear activities as an "insult to the Iranian people".

"The Europeans talk as though the Iranian people were a backward people, as if they were still in the last century when they dominated our country," he said.

His comments came as the International Atomic Energy Agency met in emergency session following Iran's resumption Monday of uranium conversion -- the precursor to enrichment -- at a plant on the outskirts of the central city of Isfahan.

In Vienna, Iranian negotiator Cyrus Nasseri said Iran was "prepared to continue negotiations with the EU-3 (Britain, France and Germany)... as long as there are no preconditions" and the talks are in "good faith."

Nasseri said Iran was "frustrated" that the EU-3 were still not acknowledging what Iran considers its right under the NPT to make nuclear fuel as part of a peaceful atomic program.

"We don't want the Iranians to have a nuclear weapon," said Bush. "We'll work with our friends on steps forward, on ways to deal with the Iranians if they so choose to ignore the demands of the world."

All rights reserved. � 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.

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