WASHINGTON – Defending his credibility, President Bush said yesterday that Iran is dangerous and must be squeezed by international pressure despite a blockbuster intelligence finding that Tehran halted its nuclear weapons program four years ago.

Bush said the new conclusion – contradicting earlier U.S. assessments – would not prompt him to take off the table the possibility of pre-emptive military action against Iran. Nor will the United States change its policy of trying to isolate Iran diplomatically and punish it with sanctions, he said.

“Look, Iran was dangerous, Iran is dangerous and Iran will be dangerous if they have the knowledge necessary to make a nuclear weapon,” the president told a White House news conference a day after the release of a new national intelligence estimate representing the consensus of all U.S. spy agencies.

On Capitol Hill, congressional Democrats said they hoped the report would have a cooling effect on the administration’s rhetoric, which they said was hyped and counterproductive. At a campaign debate in Iowa, seven Democratic presidential candidates stood in agreement that the United States should shift its focus with Iran to diplomatic engagement.

“They should have stopped the saber rattling, should never have started it,” said Sen. Barack Obama, D-Ill. New York Sen. Hillary Rodham Clinton said Bush “should seize this opportunity.” But she also said it was clear that pressure on Iran has had an effect – a point disputed by rival Sen. Joe Biden of Delaware.

While U.S. intelligence about Iran has changed, Bush showed no inclination to switch course. Iran continues to produce enriched uranium that could be transferred to a secret weapons program, he said.

“So, I view this report as a warning signal that they had the program, they halted the program. And the reason why it’s a warning signal is that they could restart it,” the president said.

Secretary of State Condoleezza Rice, enroute to Ethiopia for talks with African leaders, said it would be a “big mistake” to ease diplomatic pressure on Tehran.

“I continue to see Iran as a dangerous power in international politics,” Rice said. “At this moment, it doesn’t appear to have an active weaponization program. That frankly is good news. But if it causes people to say, ‘Oh well then we don’t need to worry about what the Iranians are doing,’ I think we will have made a big mistake.”

Rice said she would brief Russian officials and others on the issue this week, including during NATO meeting in Brussels.

Bush rattled some allies by warning recently that a nuclear-armed Iran could lead to World War III. Until Monday’s report, the administration was unwavering in its conviction that Iran was seeking nuclear weapons. Bush said he did not know about the new findings until he was briefed last week – a point challenged by some.

“The president knew, even as he was saying ‘World War III’ and all that kind of stuff,” said Sen. Jay Rockefeller, D-W.Va., chairman of the Senate intelligence committee. “He knew. He knew, he had been briefed.”

Bush drew support from European allies who said the international community should not walk away from years of talks with an often defiant Tehran that is openly enriching uranium for uncertain ends. The report said Iran could still build a nuclear bomb by 2010-15.

“We must maintain pressure on Iran,” said French Foreign Ministry spokeswoman Pascale Andreani.

The U.S. acknowledgment about faulty intelligence about Iran recalled the erroneous U.S. conclusion that Iraq possessed weapons of mass destruction, a belief that was a factor in Bush’s decision to invade Iraq.

“President Bush has lost all credibility with the American people,” said Democratic National Committee Chairman Howard Dean. “We were misled on Iraq, now it’s Iran. We need to get to the truth so our foreign policy is not only tough but smart.”

But Bush told the news conference he was not troubled about his standing, about perhaps facing a credibility gap with the American people. “No, I’m feeling pretty spirited – pretty good about life,” Bush said.

“Nothing has changed in this NIE that says, ‘Okay, why don’t we just stop worrying about it.’ Quite the contrary. I think the NIE makes it clear that Iran needs to be taken seriously as a threat to peace,” Bush said. “My opinion hasn’t changed.”

The president opened the session by challenging Congress, in the three weeks before Christmas, to approve money without conditions for the wars in Iraq and Afghanistan, extend the Foreign Intelligence Surveillance Act, pass overdue spending bills and pass a temporary fix to the alternative minimum tax so millions of taxpayers don’t get hit with tax increases.

“Based on the record so far,” he said, “Americans could be forgiven for thinking that Santa will have slipped down their chimney on Christmas eve before Congress finishes its work.”

On other issues, Bush:

-Expressed anger about a rape victim in Saudi Arabia who was sentenced to prison and 200 lashes for being alone with a man not related to her – a violation of the kingdom’s strict segregation of the sexes. “My first thoughts were these: What happens if this happens to my daughter? How would I react? And I would have been – I’d of been very emotional, of course. I’d have been angry at those who committed the crime. And I’d be angry at a state that didn’t support the victim.”

-Said that “the Venezuelan people rejected one-man rule” when they rejected a constitutional provision that would have enabled Hugo Chavez to remain in power for life and drive changes throughout Venezuelan society. “They voted for democracy.”

-Said he talked by telephone yesterday with Russian President Vladimir Putin and briefed him on the new Iran intelligence estimate. Bush also said he told Putin that “we were sincere in our expressions of concern” about irregularities in the voting that produced a sweeping parliamentary victory for Putin’s party.

-Said he has “cordial relations” with Democratic leaders of Congress despite the sharp words between the White House and Capitol Hill. He blamed Democrats for the lack of compromises, saying, “In order for us to be able to reach accord, they got to come with one voice, one position.”