The U.N. atomic watchdog challenged Iran (search) on Thursday to prove it does not have a nuclear weapons program, but rejected Washington's effort to bring the matter before the U.N. Security Council (search). Both Washington and Tehran declared victory.

In a statement endorsed by the United States, the International Atomic Energy Agency (search) said it expected Iran "to grant the agency all access deemed necessary" to defuse suspicions Tehran has a clandestine weapons program. The agency urged Iran to allow more inspections and to stop enriching nuclear fuel.

Tehran insists its program is intended to produce electricity. Iran's nuclear chief welcomed the IAEA statement, saying it reflected "our correctness and the failure of the United States."

But President Bush's spokesman, Ari Fleischer, said the IAEA had reinforced Bush's statement that he and other world leaders would not tolerate nuclear weapons in Iran.

"Iran needs to comply otherwise the world will conclude that Iran may be producing nuclear weapons," Fleischer said.

IAEA experts should return to Iran next month for more inspections — the first test of Tehran's willingness to comply. The agency's director-general, Mohamed ElBaradei, urged Iran to be "fully transparent."

"I trust, I expect, that Iran will enable us to do all that we need to do," ElBaradei said.

During the IAEA meeting, the United States ratcheted up the pressure on Iran, previously characterized by Bush as part of an "axis of evil" with North Korea and Saddam Hussein's Iraq.

The United States wanted the IAEA to declare Iran in violation of the Nuclear Nonproliferation Treaty. That would make it possible to send the matter to the Security Council for possible action.

Instead, the agency "urged" Iran to allow more intrusive inspections.

The American ambassador to U.N. agencies here, Kenneth Brill, said he was "very satisfied" with the IAEA statement. The United States had demanded Iran submit to more thorough inspections after what it called a "deeply troubling" agency report.

"We got an important message from the board that supports the U.S. position of concern about Iran's nuclear program and the call for unqualified cooperation by Iran to help the IAEA to get to the bottom of it," Brill said.

Nonaligned countries like Malaysia declined to support a tougher line. Even strong U.S. allies were eager to avoid undermining Iranian reformers like President Mohammad Khatami while strengthening religious hard-liners.

Khatami says Iran is prepared to allow unfettered IAEA inspections as long as the international community recognizes the country's right to acquire peaceful nuclear technology.

A senior Bush administration official said the IAEA statement should be viewed as "yet another step in shining a light on Iran's pursuit of nuclear weapons."

He pointed to language in the statement expressing concern about Iran's "past failures to report material, facilities and activities as required by its safeguards obligations."

"Three months ago, the rest of the world was in denial about Iran's pursuit of weapons of mass destruction," the official said in Washington.

In Tehran, Iran's nuclear chief said the statement "contained both positive and negative points" but still amounted to a victory over the United States.

"When we carefully consider the background, the extensive propaganda and many words from the United States for the past several months ... our correctness and the failure of the United States is clear," Gholamreza Aghazadeh, who runs Iran's Atomic Energy Organization, told state-run television.

Russian Deputy Foreign Minister Yuri Fedotov said Moscow was pleased that the agency decided against a harsh resolution, the Interfax news agency reported.

Fedotov said the IAEA declaration "takes note of the fact that Iran has not reported on all its nuclear material and programs, but on the other hand takes into account steps by the Iranian side to correct the situation."

Russia is helping build a light-water reactor in Iran for a reported $800 million. Moscow has urged Iran to allow more intrusive inspections, but has said it will ship in nuclear fuel anyway, provided Iran agrees to return all spent fuel to Russia.

Diplomats cautioned of difficult days ahead, as inspections continue and IAEA environmental tests are processed. If inspectors find more failures in Iranian promises to disclose its use of nuclear material, the push will be on to make the board go further, they said.