VIENNA, Austria -- Iran's president said Tuesday he will submit new proposals in negotiations over his country's nuclear program but denounced a European offer of aid as an "insult," as the U.N. nuclear agency tried to resolve the crisis without referring Tehran to the Security Council.
While the International Atomic Energy Agency's 35-nation board considered a new warning to a defiant Iran to suspend its atomic activities, fresh areas of concern emerged Tuesday.
An exiled dissident said Iran recently produced 4,000 centrifuges capable of enriching uranium to weapons grade. Alireza Jafarzadeh, who helped uncover details of Iran's program in 2002 that fueled U.S. suspicions the country was trying to build a nuclear bomb, told The Associated Press the centrifuges are ready to be installed at the nuclear facility in Natanz.
In Tehran, Iran announced it has improved the range and accuracy of its Shahab-3 missile. It said the weapon can strike targets up to 1,200 miles away nearly dead-on -- a statement sure to unnerve Western officials who fear the regime one day will be able to fit such missiles with nuclear warheads.
Mahmoud Ahmadinejad, the country's new president, spoke Tuesday with U.N. Secretary-General Kofi Annan and said Iran was willing to continue the negotiations with the Europeans.
"We are ready to proceed with talks. Of course, I will put forward initiatives in this respect after forming my Cabinet," Ahmadinejad told Annan.
But Ahmadinejad is bringing in one of the most hard-line elements in the Islamic regime to head the talks -- another sign Iran has grown more willing to defy the West in pursuing its nuclear program since he was elected president in June, replacing reformist President Mohammad Khatami.
President Bush welcomed Ahmadinejad's willingness to continue negotiations but said he was "deeply suspicious" of Iran.
"Iranians are getting a 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," he said at his Texas ranch.
Bush said that if Iran does not cooperate, United Nations sanctions are "a potential consequence."
However, diplomats said there was little stomach for reporting Tehran to the Security Council, in part out of fears that such a move -- the International Atomic Energy Agency's last resort -- might inflame support within Iran for the regime's nuclear ambitions and scuttle any chances at winning the country over with economic incentives.
Envoys from some nations whose own nuclear activities have come under scrutiny, such as Brazil and Argentina, also appeared reluctant to subject Iran to measures that could be applied to their programs one day.
An IAEA draft resolution crafted by Britain, France and Germany and obtained by the AP does not mention the Security Council.
The text, which could be altered during negotiations, says "the agency is not yet in a position to conclude that there are no undeclared materials or activities in Iran." It urges Iran to cooperate by "re-establishing full suspension of all enrichment-related activities."
Jafarzadeh, the Iranian dissident who spoke with the AP by telephone from Washington, where he runs the think tank Strategic Policy Consulting, said his information on the centrifuges came from sources within the Tehran regime who have proven accurate in the past. He described the information as "very recent" and unknown to the IAEA.
The IAEA was taking the allegation "seriously" and would investigate "should we find anything credible contained within it," spokeswoman Melissa Fleming said.
The agency previously said it was aware of 164 centrifuges at Natanz, 300 miles south of Tehran.
Ali Hafezi, a spokesman for Iran's Atomic Energy Organization, said Tuesday that Tehran last year gave the IAEA a full disclosure of its nuclear program, including the number of centrifuges. He would not say how many centrifuges Iran has.
Iran had agreed with the IAEA to stop building centrifuges, some of which can be used to enrich uranium to levels high enough to fuel a nuclear weapon, but last year announced it had resumed centrifuge construction.
Centrifuges also can be used to produce fuel for nuclear power plants, which Iran insists is its only intention. The United States contends it is running a covert effort to make nuclear weapons.
Iran on Saturday rejected a package of EU economic and political incentives presented by envoys from Britain, France and Germany, and this week it resumed some uranium conversion activities at its nuclear facility at Isfahan.
On Tuesday, Ahmadinejad told Annan the European proposals were an "insult" to Iran.
Sirus Nasseri, Iran's top delegate to the IAEA, said Iranian officials would break IAEA seals at Isfahan on Wednesday and start additional conversion activities. An IAEA surveillance system would be functioning by then, he added.
Jafarzadeh, the dissident, said the centrifuges were manufactured in Isfahan and in Tehran, and that work continued in recent months on buildings and concrete foundations needed to prepare Natanz for centrifuge installation.
"This clearly shows that, contrary to Iran's claim that it is transparent and cooperating with the IAEA, it hasn't stopped being deceitful, hasn't stopped lying and hiding its program," he said.
The IAEA's board of governors was expected to issue a resolution by Thursday urging Tehran to suspend its nuclear activities.
"Iran must not be allowed to violate its international commitments and must not be allowed to develop nuclear weapons," said Gregory Schulte, the U.S. envoy to the IAEA.
IAEA chief Mohamed ElBaradei said he hoped the standoff was "simply a hiccup in the process and not a permanent rupture."
"We have made a very good progress in the last couple of years with regard to clarifying Iran's past nuclear activities," ElBaradei said. "The important thing is to go back to the negotiating process and avoid any escalation of the situation."
Russia called on Iran to suspend uranium conversion "without delay," and German Chancellor Gerhard Schroeder urged Tehran to reconsider the EU's offer.
"I am worried about Iran's current policy," Schroeder said. "The overarching goal must be that we can solve this very difficult, worrying conflict peacefully."