US President George W Bush is working to shore up his embattled Iran strategy after a US intelligence report said Iran halted its nuclear weapons programme in 2003.

The intelligence assessment has reopened the international controversy over Iran's disputed programme.

Iran said the US report had vindicated its stance, while UN atomic watchdog chief Mohamed ElBaradei said the document could help defuse tension though he added that Iran must step up cooperation with his agency.

However Mr Bush is adamant. 'Iran was dangerous, Iran is dangerous and Iran will be dangerous if they have the knowledge necessary to make a nuclear weapon,' he told a White House press conference.

President Bush even called on US allies to step up pressure on Iran. 'The best way to ensure that the world is peaceful in the future is for the international community to continue to work together to say to the Iranians we are going to isolate you.'

Iran welcomed the report, which confirmed that it had halted a drive for atomic weapons in 2003.

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

'This report proves that Mr Bush's statements - which always speak of the serious threat of Iran's nuclear programme - are unreliable and fictitious,' said foreign ministry spokesman Mohammad Ali Hosseini.

International Atomic Energy Agency head Mohamed ElBaradei, whose inspectors have been investigating Iran's nuclear drive for four years, called for immediate negotiations between Iran and its western critics.

'This new assessment by the US should help to defuse the current crisis,' he said in a statement. 'At the same time, it should prompt Iran to work actively with the IAEA.'

In October, President Bush had sounded the alarm over Iran's nuclear drive, raising the spectre of 'World War III' or a 'nuclear holocaust' if it obtained an atomic arsenal.

The US report, a consensus view of all 16 US spy agencies, said Iran appeared 'less determined to develop nuclear weapons than we have been judging since 2005'.

It concluded that 'the programme probably was halted primarily in response to international pressure (which) suggests that Iran may be more vulnerable to influence on the issue than we judged previously'.

The assessment said US agencies had 'moderate confidence' that Iran would be able to produce enough enriched uranium for a weapon sometime between 2010 and 2015.