Iran's new president said yesterday that he wants to continue negotiations with Europe over the fate of the country's nuclear program and is working on a set of new ideas to stave off a crisis, a message President Bush cautiously greeted as a "positive sign."

"The man said he wanted to negotiate," Bush told reporters at his ranch near Crawford, Tex., after learning about a call yesterday between Iranian leader Mahmoud Ahmadinejad and U.N. Secretary General Kofi Annan.

"I think that's a positive sign that the Iranians are getting a message that it's not just the United States that's worried about their nuclear programs, but the Europeans are serious in calling the Iranians to account and negotiating," Bush said, adding that he remains skeptical of Iran's overall intentions.

The announcement from Tehran came as delegates from 35 countries met in emergency session at the International Atomic Energy Agency (IAEA) in Vienna to discuss the Iranian nuclear case, which has been the subject of more than two years of U.N. nuclear inspections and an intense diplomatic effort by Britain, France and Germany to keep Iran from developing atomic weapons.

The meeting was triggered by Iran's decision earlier this week to resume uranium conversion work at a key nuclear facility. The move ended an eight-month suspension of Iran's nuclear program and threw the European negotiating effort into turmoil.

The European trio had said for months that the talks would be terminated if Iran broke the suspension. Last week, officials in London, Paris and Berlin issued sharp warnings that Iran could be subject to U.N. Security Council action, as the Bush administration has pushed for, if it went ahead with the conversion work in the town of Isfahan. But two days after the work at Isfahan began, and even as Iranian officials said the program would be accelerated, not stopped, European officials spoke little of threats yesterday. Instead, they urged Iran to back down and continue negotiating.

"We think it is still possible to negotiate," said French Foreign Minister Philippe Douste-Blazy. "Our hand is still outstretched." Asked whether the matter should be referred to the Security Council, Douste-Blazy said it was up to the IAEA board.

Bush said yesterday he would work with European allies on next steps if Iran does not reverse course. "Certainly the United Nations is a potential consequence," the president said. The White House was hoping the IAEA board would pass a strongly worded resolution that would move the matter directly to New York if Tehran continued with the conversion work.

"Iran's willingness to come back to the negotiating table is only a positive sign if Iran is also willing to stop conversion activities at Isfahan," said Robert J. Einhorn, former assistant secretary for nonproliferation at the State Department.

But the European posture appears to be reflective of the limited desire in Vienna to take any action that could escalate an international crisis with Iran, whose program has sparked deep suspicions but has not violated any international laws. Diplomats, who spoke on the condition of anonymity, said there was little chance they would approve any resolution that threatened Iran with Security Council referral.

Instead, diplomats were negotiating a relatively mild text aimed at giving the Iranians and the Europeans some space to work out differences over the future of their talks.

According to a copy of a draft resolution being reviewed yesterday, the board would urge Iran to reestablish the suspension and call on IAEA Director General Mohamed ElBaradei to report back by Aug. 20. It did not include any mention of consequences. In Vienna, ElBaradei asked that all sides exercise "maximum restraint. I would hope that this is simply a hiccup in the process and not a permanent rupture" in the talks, he said.

U.N. officials, who spoke on the condition of anonymity, said Ahmadinejad promised during a call to Annan to quickly form his cabinet and put together a set of proposals for the Europeans. In the meantime, he officially replaced the country's lead negotiator with Ali Larijani, a former Republican Guard commander and hardliner who is close to Iran's powerful ruling cleric.

Iran, rich in oil and gas, has maintained that its program, built in secret over 18 years, is designed to bring the country a new energy source and is not for nuclear weapons. U.N. inspectors, whose investigation is ongoing, have not found any evidence of a weapons program. But the scale of the Iranian effort and its clandestine nature have fueled long-held suspicions in Washington that Iran intends to build atomic weapons.

In November, Iran agreed to suspend its nuclear work while it discussed the possibility of a final agreement with the Europeans aimed at alleviating suspicions about the program. On Friday, the European trio offered Iran a package of conditional and sometimes ambiguous incentives in exchange for a legally binding commitment by Tehran to permanently forgo much of its nuclear program. Iran, which claims to be exercising its legal rights to a nuclear energy program under the nuclear Non-Proliferation Treaty, has said it would not give up the program.

It formally rejected the European offer Monday as an insult.

In a forceful defense of his country tinged with criticism of the United States, Iranian official Sirus Nasseri told the IAEA board yesterday that Iran would remain a non-nuclear-weapons state and is committed to placing its entire program under U.N. inspection. He appealed to the board to refrain from decisions that could "trigger a trend of confrontation, which is bound to escalate and where everyone stands to lose."

Staff writer Jim VandeHei in Crawford , Tex., contributed to this report.

President Bush, meeting with his economic team in Crawford, Tex., said he remained skeptical of Iranian overtures to negotiate acceptable terms for its nuclear program.