While Iran argued that sanctions were no longer justified, US President George W. Bush said he was confident Britain, France, Germany and Russia saw its nuclear programme as "a problem" requiring sustained pressure on the Islamic republic.

"If we want to supply (nuclear) fuel for one year to a power plant, we should have 50,000 centrifuges," dramatically raising Iran's nuclear profile, Ahmadinejad said in a speech in Ilam province.

Uranium enrichment is a potential bomb-making process and the key sticking point in the crisis.

The International Atomic Energy Agency (IAEA), in its latest report, confirmed Iran had reached its medium-term goal of building 3,000 centrifuges at its enrichment facility at Natanz in the centre of the country.

But the US intelligence community's report said Iran had halted a drive for atomic weapons in 2003 -- despite years of accusations from Bush that Tehran was actively seeking a nuclear bomb.

Russia and China argued that the report diminished the need for a third set of UN Security Council sanctions against Tehran, in contrast to Western powers which pleaded for no let-up in the international pressure.

"This report tries to extract America from its impasse but it also is a declaration of the Iranian people's victory against the great powers," Ahmadinejad told thousands of supporters at a rally.

Describing the report as the "final blow" to the hopes of the West, he accused Iran's enemies of wanting to deprive it of civilian energy when fossil fuels run out "within the next 50 years".

The National Intelligence Estimate (NIE) said US allegations about Iran's atomic goals had been overblown for at least two years, although it could have the capability to make a nuclear weapon by 2015.

Iranian Oil Minister Gholam Hussain Nozari said Washington should now abandon sanctions. If not, "I don't understand their logic and how they can convince world opinion," he said on the sidelines of an OPEC ministerial meeting in Abu Dhabi.

The US president, meanwhile, looking to rescue his Iran policy, said US Secretary of State Condoleezza Rice and US national security adviser Stephen Hadley had reached out to London, Paris, Berlin, and Moscow.

"These countries understand that the Iranian nuclear issue is a problem, and continues to be a problem, that must be addressed by the international community," Bush said.

The Islamic republic had "more to explain about its nuclear intentions and past actions," he said, citing the NIE's finding that Iran has yet to acknowledge it had a covert nuclear weapons programme "into the fall of 2003."

The United States wants the UN Security Council to agree a third sanctions resolution to punish Iran's refusal to suspend uranium enrichment.

But China's UN ambassador Wang Guangya suggested an agreement by six world powers to seek new sanctions could be called into question by the US intelligence assessment.

"I think Council members will have to consider that, because ... now things have changed," he told reporters.

And Russian Foreign Minister Sergei Lavrov said: "We will judge the situation around the idea of a new UN Security Council resolution on the basis of all factors, including, of course, on the basis of public confirmation of the US information."

Hans Blix, former head of the International Atomic Energy Agency, said any military strike against Iran "would not be credible" in light of the intelligence report's findings.

Maintaining a hard line, Israel's Foreign Minister Tzipi Livni said Wednesday that stronger sanctions were the best way of ensuring Iranian compliance with UN demands to halt uranium enrichment.

"The way to stop Iran is by more effective sanctions," Livni told a news briefing in Ljubljana.

"Iran with nuclear weapon is something that the world cannot afford. It is clearly a threat to the region ... While we are talking, here at this press conference, Iran continues with its enrichment activities," Livni said.

Iran must still answer international concerns about its nuclear ambitions or face tougher sanctions, Britain's foreign secretary said Wednesday after talks with his Chinese counterpart.

Responding to a new US intelligence report which said Iran had halted a nuclear weapons drive four years ago, David Miliband said Tehran was not yet off the hook and urged it to end its "defiance" of the United Nations.

"That defiance remains the case," he told reporters after talks in London with Chinese Foreign Minister Yang Jiechi.

The five permanent United Nations Security Council members -- Britain, China, France, Russia and the United States -- plus Germany have been leading the international effort to ensure Iran does not develop a nuclear arsenal.

Miliband said Britain and China were committed to non-proliferation and that goal "remains at the heart of our efforts".

"We will continue to work very closely together, secure in the knowledge that we are pursuing the shared goal of a more stable and peaceful world," he said.

The US National Intelligence Estimate released Monday said Iran had halted a drive for atomic weapons in 2003 but retained the capability to make a nuclear weapon by 2015.

It said previous intelligence analyses, the basis of Western fears that Iran is secretly working on a nuclear arsenal, had overestimated the Islamic republic's activities.

The report was hailed as a "great victory" in Tehran, but US President George W. Bush said Iran's nuclear programme remained "a problem that must be addressed by the international community."

Russia and China, however, have argued that the report diminishes the need for a third set of UN Security Council sanctions against Tehran.

Miliband said the International Atomic Energy Agency (IAEA), the UN's nuclear watchdog in charge of weapons inspections, had called for a "positive outcome" from ongoing talks with Iran.

The IAEA has said Iran is not fully cooperating with inspections teams trying to verify the peaceful nature of Tehran's nuclear programme.

"Without that positive outcome there would be a further sanctions resolution and the origins of that sanctions resolution are in the defiance by Iran of the international community in respect of uranium enrichment," he said.

Uranium enrichment can lead to nuclear energy as well as nuclear weapons but Iran insists its has purely peaceful motives.

Yang earlier told the Chatham House international affairs think-tank here that Iran should step up its dialogue with the IAEA in a bid to resolve the stand-off.

Beijing backs the international community's "dual track" carrot-and-stick strategy for dealing with Tehran's uranium enrichment activity, he said.

Though asked, he did not say whether Beijing would support a new Security Council resolution hardening sanctions against the Islamic republic.

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