President Bush said Sunday that Iraq has fooled the world for more than a decade about its banned weapons and the United Nations now faces "a moment of truth" in disarming Saddam Hussein.

"It is clear that not only is Saddam Hussein deceiving, it is clear he's not disarming. And so you'll see us over the next short period of time working with friends and allies and the United Nations to bring that body along," Bush told congressional Republicans at a policy conference.

He said the terrorist acts of Sept. 11 changed America and the world.

Before the attacks, Bush said, "We were confident that two oceans could protect us from harm. ... We are now a battle ground. We are vulnerable."

Bush said the U.S. public needs to understand that the country is expanding the fight against terrorism to Iraq and elsewhere.

Saddam "wants the world to think that hide-and-seek is a game that we should play. And it's over," Bush said.

The president spoke as chief U.N. weapons inspector Hans Blix said in Baghdad that he saw a beginning of Iraq's understanding that it must seriously observe U.N. demands for disarmament. U.N. nuclear chief Mohamed ElBaradei said he expected the Security Council to give the inspectors more time "as long as we are registering good progress."

Asked later about Blix's statement, White House spokesman Ari Fleischer noted that the president has said: "Given the fact that Saddam Hussein is not disarming, time is running out."

Blix and ElBaradei are to make their next report to the U.N. Security Council on Friday. That could be pivotal toward determining whether the United States should launch military action against Iraq.

In his speech, given while the inspectors held a televised news conference from Iraq, Bush said, "It's a moment of truth for the United Nations. The United Nations gets to decide shortly whether or not it is going to be relevant in terms of keeping the peace, whether or not its words mean anything.

"But one thing is certain, for the sake of peace and for the sake of security of the United States and our friends and allies, we will disarm Saddam Hussein if he will not disarm himself."

Bush said "it is important for the country to realize that Saddam Hussein has fooled the world for 12 years, is used to fooling the world, is confident he can fool the world."

Earlier, Bush's national security adviser, Condoleezza Rice, dismissed movement toward compliance by Iraq as another attempt at "cheat and retreat."

"We have seen this game with Iraq many times before, throughout the '90s," she said on CBS's "Face the Nation."

Secretary of State Colin Powell said a reported French-German proposal to increase the number of weapons inspectors in Iraq in hopes of averting U.S. military action is "a diversion, not a solution" to disarming Saddam.

"The issue is not more inspectors. The issue is compliance on the part of Saddam Hussein," Powell said on NBC's "Meet the Press."

The plan would call for the deployment of thousands of U.N. soldiers, reconnaissance flights and a tripling of the number of weapons inspectors, according to the German magazine Der Spiegel.

But the top Democrat on the Senate Armed Services Committee, Michigan's Carl Levin, told "Fox News Sunday" that "it seems to me we ought to be welcoming efforts to forestall war, even if we disagree with those efforts after we read them. We should not treat the U.N. Security Council as some kind of a stumbling block."

Powell said there would be no need for such a plan if Saddam does what he is supposed to, such as revealing the whereabouts of allegedly unaccounted for anthrax and other deadly chemical and biological agents. That can be handled with a mere handful of inspectors, Powell said.

Also Sunday, Pope John Paul II ordered a special envoy sent to Iraq to emphasize his plea for peace and encourage Iraqi authorities to cooperate with the United Nations, the Vatican said.