Bush holds out new hope for Iran nuclear talks

WASHINGTON - US President George Bush has said he sees signs of progress in European talks over Iran's nuclear program.

He appeared to leave open the possibility that Tehran could retain some limited capabilities short of being able to turn enriched uranium into a bomb.

"The best way to solve any difficult issue is through diplomacy," Bush said.

He said Iran is "not to be trusted when it comes to highly enriched uranium -- or highly enriching uranium".

But in comments that some experts said could lay the groundwork for a compromise, Bush added: "Our policy is to prevent them from having the capacity to develop enriched uranium to the point where they're able to make a nuclear weapon."

White House spokesman Scott McClellan said "our position hasn't changed," and that Bush was not signalling any change in policy that would open the door to uranium enrichment up to "the point" that Tehran would be able to make a nuclear bomb.

Iran has frozen its work on the nuclear fuel cycle, giving European negotiators until early August to propose a compromise.

It insists it has every right to turn uranium ore mined in its central deserts into fuel for nuclear power stations such as the one being built with Russian help at Bushehr on its south coast.

Washington and European allies are seeking a deal with firm guarantees that the fuel will not be diverted into atomic warheads.

In a policy shift to bolster the negotiations, Bush agreed to let Iran apply to join the World Trade Organisation. But he sought to play down the decision by drawing a distinction between letting Iran apply for membership and letting it join the trade body.

- REUTERS