In a meeting with a small group of journalists at the White House Wednesday, after US officials rebuffed a Tehran's call for a US-Iran summit, Obama said the effects of international pressure were slowly becoming apparent.

But he warned that changing Tehran's "calculus is very difficult."

"This is painful for them and we are beginning to see rumblings in Iran that they are surprised by how successful we've been," Obama said, according to an account of the meeting from The Atlantic magazine.

And he acknowledged that sanctions had yet to force a change in Iran's policy.

"It may be that their ideological commitment to nuclear weapons is such that they're not making a simple cost-benefit analysis on this issue," Obama was quoted as saying.

Obama in March 2009 extended a hand of diplomacy towards Iran in an attempt to break the deadlock between the two countries.

Since then, animosity between the two nations has steadily worsened, with the United States leading the charge for new international sanction that were slapped on Tehran over its alleged pursuit of nuclear weapons.

"It is very important to put before the Iranians a clear set of steps that we would consider sufficient to show that they are not pursuing nuclear weapons," Obama said, according to the Washington Post.

"They should know what they can say 'yes' to."

The report said Obama left open the possibility that the United States would accept a deal allowing Iran to maintain its civilian nuclear program, so long as Tehran provides "confidence-building measures" to verify that it is not building a bomb.

On Tuesday, White House spokesman Robert Gibbs rebuffed a proposal from Iran's hardline President Mahmoud Ahmadinejad for face-to-face summit talks with Obama.

Ahmadinejad meanwhile urged Obama on Wednesday to join talks on a nuclear fuel swap deal, saying Tehran was ready to begin discussions.

Ahmadinejad also repeated an offer to hold talks with US President Barack Obama on "global problems" at the UN General Assembly in September.

"We are ready for talks based on respect, justice and Iran's proposals after mid-Ramadan (late August) and we advise him (Obama) not to miss this opportunity," Ahmadinejad said.

Gibbs said Washington has "always said that we'd be willing to sit down and discuss Iran's illicit nuclear program, if Iran is serious about doing that," adding that "to date, that seriousness has not been there."

NBC talk show moderator David Gregory said the president's session with reporters was a way of expressing to the world that Washington prefers a peaceful resolution of the nuclear issue over use of force.

"One of the things the president talked about was all of this talk of engagement, sitting down with Iran, pursuing some channels, was a way to say to the international community, look, we are doing everything we can do to try to bring Iran to the table and solve this peacefully," Gregory told MSNBC.

The Obama administration "wants to be more public and suggestive about the use of force here, based on that world view which is we cannot tolerate that kind of proliferation," Gregory said.

"While at the same time saying, you know, with all of this, there may be an opening for them to actually come to the table and sanctions being a key part of that."

Iranian media reported on Thursday that Ahmadinejad had announced the Islamic republic was working on a three-stage rocket to carry a satellite 1,000 kilometers (more than 600 miles) into space, an announcement that raised fresh concerns among world powers already at odds with Tehran over its nuclear drive.

Western countries suspect Iran is secretly trying to build a nuclear weapons capability and fear the technology used to launch the space rocket could be diverted into development of long-range ballistic missiles capable of carrying nuclear warheads.

Tehran strongly denies the charges, saying its nuclear program is for peaceful purposes and that it has a right to the technology already in the hands of many other nations, including its archfoe the United States.

earlier related report
China defends business ties with Iran
Beijing (AFP) Aug 5, 2010 - China has defended its business dealings with Iran after a senior US official called on Beijing to follow UN sanctions against the Islamic republic to the letter.

The statement from a Chinese foreign ministry spokeswoman published in state media Thursday also came after a senior US lawmaker called for sanctions to be imposed on Beijing over its major investments in Tehran's energy sector.

"China's trade with Iran is normal business exchange, which will not harm the interests of other countries and the international community," the spokeswoman, Jiang Yu, was quoted as saying by the China Daily.

"As a permanent member of the UN Security Council, China has always observed the council's resolutions."

In June, the UN Security Council imposed a fourth set of sanctions on Iran over its disputed nuclear drive, which the West and Israel say is a covert weapons drive, and especially over its refusal to freeze uranium enrichment.

China, which wields a veto on the council, backed the UN measures, but it has since voiced opposition to further unilateral sanctions imposed by the United States and the European Union, instead calling for more negotiations.

On Monday, Robert Einhorn, the US State Department's special adviser for non-proliferation and arms control, appealed to China to fully back sanctions on both Iran and North Korea, also suspected of developing nuclear weapons.

"We want China to be a responsible stakeholder in the international system," Einhorn said during a visit to Seoul.

"That means cooperating with the UN Security Council resolutions and it means not backfilling or not taking advantage of responsible self-restraint of other countries."

A US embassy spokesman in Beijing said Einhorn was not expected in China this week, but could visit later this month.

Also on Monday, US lawmaker Ileana Ros-Lehtinen -- the top Republican on the House Foreign Affairs Committee -- said investments by Chinese state-run firms in Iran's energy sector were "effectively bankrolling" its nuclear programme.

Ros-Lehtinen did not offer details, but US officials have noted that Chinese firms have been stepping in to fill the void left by companies leaving Iran because of UN and US sanctions.

"It's time to implement our sanctions laws and demonstrate to Russia and China that there are consequences for abetting Tehran and flouting US sanctions," she said in a statement.

"Russia and China appear determined to continue to facilitate Iran's dangerous policies. This must not be allowed to continue without serious repercussions."

China has emerged as Iran's closest trading partner and has major energy interests in the Islamic republic.

China is investing 40 billion dollars in Iran's oil and gas industry, the Islamic republic's deputy oil minister Hossein Noqrehkar Shirazi said Saturday. Iranian Oil Minister Massoud Mirkazemi is due in Beijing this week.

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