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US President George W. Bush said on Wednesday Iran's agreement to suspend its uranium enrichment programme and allow nuclear inspections was "a very positive development" and Tehran must now follow through on its commitments.

US officials have accused Iran of seeking to develop nuclear weapons, a charge Tehran denies.

"It looks like they're accepting the demands of the free world and now it's up to them to prove that they've accepted the demands. It's a very positive development," Bush said at a news conference in Bali, Indonesia, with President Megawati Sukarnoputri.

In a later briefing with reporters aboard Air Force One, Bush was more cautious, saying: "First things first... The IAEA (International Atomic Energy Agency) must be allowed in ... International inspectors must be able to verify."

But Bush held out hope that it could eventually "help our relations with Iran."

They were the US president's first public remarks on the agreement, under which Iran agreed to allow snap inspections of its nuclear sites and to freeze uranium enrichment.

Three visiting European ministers hailed the deal as a promising start to removing doubts about Tehran's atomic aims.

Bush thanked the British, French and German foreign ministers "for taking a very strong universal message to the Iranians that they should disarm."

The three European nations joined Washington in demanding Tehran accept tougher inspections by the IAEA, but they recognised Iran's right to develop a nuclear energy programme and held out the prospect of technical help with it in future.

Bush has singled out Iran as part of an "axis of evil" along with pre-war Iraq and North Korea.

Washington has questioned why Iran needs a civilian nuclear programme given its oil wealth. Bush administration officials, while encouraged by latest developments, made clear they were taking a wait-and-see approach to the nuclear pact.

"We've always raised serious concerns about the Iranians," White House spokesman Scott McClellan said.

Iran faced an October 31 UN deadline to prove it had no atomic bomb ambitions or face possible sanctions by the UN Security Council.

The IAEA found arms-grade enriched uranium at two facilities in Iran this year. Iran blamed the findings on contaminated parts it bought abroad on the black market.

The United States has also accused Iran of harbouring and assisting terrorists. Tehran denies the charge.

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