President George W. Bush and visiting German Chancellor Angela Merkel said they will continue to take a diplomatic approach in dealing with Iran's defiance of international demands that it halt its uranium enrichment program.

"What the Iranian regime must understand is that we will continue to work together to solve this problem diplomatically, which means they will continue to be isolated," said Bush, who has recently warned that a nuclear-armed Iran could lead to World War III.

Tehran says its uranium enrichment is for a civilian nuclear energy program, but the Western nations believe otherwise.

Bush and Merkel spoke at a joint press conference Saturday at Bush's Texas ranch, where the European leader arrived a day earlier for an overnight visit.

Merkel said all members of the Security Council must be engaged on the issue and said that if talks with Tehran "do not yield any results, further steps will have to be made."

"We need to think about further possible sanctions," she said through a translator, "and we do not only need to think about them but we need to talk and agree."

Russia and China — two of the five permanent members of the U.N. Security Council — are blocking the U.N. from moving toward a third set of harsher sanctions against Iran.

Bush dismissed a question about when patience with Iran would run out.

Merkel arrived Friday with her husband, Joachim Sauer, for the visit to Bush's remote central Texas ranch. The leaders' talks spanned the globe, from Afghanistan to Iran and from Russia to Kosovo to the United Nations.

The German and American leaders also discussed climate change, on which the two advocate different approaches.

Bush summed up his position — that emissions reductions should be voluntary and mostly dependent on technological breakthroughs — in folksy language. "It's hard to deal with the climate change issue if you're broke," he said.

Merkel made plain she would like more aggressive action to combat global warming. "This is a very crucial time to really set the agenda for a post-Kyoto regime," she said, referring to impending global talks to find a new treaty to replace an expiring one governing emissions requirements.

Also at the news conference Saturday, Bush voiced some support for Pakistan's President Gen. Pervez Musharraf. Bush said the plans by Musharraf's government to lift a state of emergency within a month, hold parliamentary elections by mid-February and release an opposition leader from house arrest were "positive steps."

Merkel's weekend Texas visit began with a welcome ride in the president's pickup truck and a dinner of beef tenderloin and cheese grits hosted by Bush and his wife, Laura. The president said the two leaders got up Saturday to talk while on a walking tour of the property.

"It was a glorious morning — the sun beginning to rise and the birds beginning to chirp — and we were able to have meaningful discussions on a lot of issues," he said. Those discussions continued in his home office and were wrapping up over a hamburger lunch.