President Bush (search) refuses to rule out war with Iran. Iranian President Mohammad Khatami (search) says his country is ready to defend itself against a U.S. attack. The United States is pushing for a peaceful solution to its nuclear impasse with Iran but, with mistrust on both sides running high, encouraging signs are hard to find.

"You look around the world at potential trouble spots, Iran is right at the top of the list," Vice President Dick Cheney (search) said Thursday in an interview with radio host Don Imus, hours before being sworn in to a second term.

Asked hypothetically whether the United States would yield to Israel in a scenario in which an attack against Tehran was being considered, he said, "One of the concerns people have is that Israel might do it without being asked, that if in fact the Israelis became convinced the Iranians had a significant nuclear capability, given the fact that Iran has a stated policy that their objective is the destruction of the state of Israel, that the Israelis might well decide to act first and let the rest of the world worry about cleaning up the diplomatic mess afterward."

"We don't want a war in the Middle East if we can avoid it," Cheney quickly added, "and certainly, in the case of the Iranian situation, I think everybody would best suited by, and or best treated or dealt with, if we could deal with it diplomatically."

On Monday, Bush reaffirmed his support for a diplomatic settlement of Iran's nuclear program but said, "I will never take any option off the table."

Perhaps the most pessimistic comment of all this week came from Sen. Joseph Biden, D-Del.

"There may be nothing we can do to persuade Iran not to develop weapons of mass destruction," Biden said during a Senate Foreign Relations Committee confirmation hearing for Secretary of State-designate Condoleezza Rice.

Both Rice and Cheney made clear that the nuclear diplomacy the United States has been pursuing in the U.N. nuclear watchdog agency will continue.

They said the administration could raise the stakes with Iran by referring the nuclear question to the U.N. Security Council if Iran does not abide by its nonproliferation commitments.

The administration has been hopeful that a nonproliferation initiative being carried out with Iran by Germany, France and Britain will produce results.

But the administration is skeptical that Iran is bargaining in good faith. For its part, Iran says its nuclear program is aimed at producing energy, not weapons.

Rice said U.S. differences with Iran go well beyond its nuclear program.

"It's really hard to find common ground with a government that thinks Israel should be extinguished," she told senators. "It's difficult to find common ground with a government that is supporting Hezbollah and terrorist organizations that are determined to undermine the Middle East peace that we seek."

Beyond that, Rice listed Iran among six "outposts of tyranny."

Khatami, traveling Thursday in Africa, seemed unconcerned about the consequences of a possible U.S. attack.

"We have prepared ourselves," he said. He added that he did not anticipate any "lunatic" military move by the United States because Washington has too many problems in Iraq.

According to an article by Seymour Hersh published this week in The New Yorker, U.S. officials have been trying to get to the bottom of Iran's nuclear puzzle through a covert operation inside Iran that has been under way since last summer.

Defense Department officials said the article was filled with mistakes but did not deny its basic point.