By Matt Spetalnick
WASHINGTON (Reuters) - A new U.S. intelligence report says Iran halted its nuclear weapons program in 2003 and it remains on hold, contradicting the Bush administration's earlier assertion that Tehran was intent on developing a bomb.
The new National Intelligence Estimate (NIE) released on Monday could hamper U.S. efforts to convince other world powers to agree on a third package of U.N. sanctions against Iran for defying demands to halt uranium enrichment activities.
Iran says it wants nuclear technology only for civilian purposes, such as electricity generation.
Tensions have escalated in recent months as Washington has ratcheted up the rhetoric against Tehran, with U.S. President George W. Bush insisting in October that a nuclear-armed Iran could lead to World War Three.
But in a finding likely to surprise U.S. friends and foes alike, the latest NIE concluded: "We do not know whether (Iran) currently intends to develop nuclear weapons."
That marked a sharp contrast to an intelligence report two years ago that stated Iran was "determined to develop nuclear weapons."
But the new assessment found Iran was continuing to develop technical capabilities that could be used to build a bomb and that it would likely be capable of producing enough highly enriched uranium for a nuclear weapon "sometime during the 2010-2015 time-frame."
Iran has already been hit with two rounds of U.N. sanctions over its defiance. Washington, which insists it wants to solve the problem diplomatically while leaving military options open, is pushing for a third package.
The nuclear standoff has become a major issue of debate in the 2008 U.S. presidential campaign, with candidates from both major parties weighing in on the prospects for military action against Iran.
U.S. STILL SEES IRANIAN "RISK"
"Today's National Intelligence Estimate offers some positive news," Bush's national security adviser Stephen Hadley said in a statement.
"It confirms that we were right to be worried about Iran seeking to develop nuclear weapons. It tells us that we have made progress in trying to ensure that this does not happen," he said.
"But the intelligence also tells us that the risk of Iran acquiring a nuclear weapon remains a very serious problem."
The latest NIE said: "We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program. We also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons."
The report said U.S. intelligence had "moderate confidence" that Tehran had not restarted its nuclear weapons program by mid-2007, but added that Tehran's intentions were unclear.
"Iranian entities are continuing to develop a range of technical capabilities that could be applied to producing nuclear weapons, if a decision is made to do so," it said.
(Editing by John O'Callaghan)