President Bush says Iran faces greater isolation and heavier sanctions, if it rejects an international package of incentives to suspend uranium enrichment. Mr. Bush spoke in New York, hours before his scheduled departure to Vienna for a U.S.-E.U. summit, where Iran's nuclear program is expected to be a focal point of discussions.

President Bush speaks at commencement ceremony of the U.S. Merchant Marine Academy in Kings Point, N.Y, Monday, June 19

President Bush says a nuclear-armed Iran would pose a grave threat to people everywhere, and that Tehran must fully and verifiably suspend the enrichment and reprocessing of nuclear fuel. Doing so, the president says, will allow international negotiations to go forward that will, in Mr. Bush's words, "bring Iran real benefits."

The president said the five permanent members of the U.N. Security Council plus Germany are in agreement on this matter, and that Tehran has a choice to make.

"If Iran's leaders reject our offer, it will result in action before the Security Council, further isolation from the world, and progressively stronger political and economic sanctions," he said.

Mr. Bush was addressing graduates at the U.S. Merchant Marine Academy at Kings Point, New York, ahead of this week's U.S.-European Union Summit in Vienna.

Iran has rejected any preconditions for nuclear talks, and insists its nuclear activities, including uranium enrichment, are designed solely for peaceful energy purposes. The United States and Europe suspect Iran's nuclear program aims to produce weapons. Their incentives package is believed to include an offer of non-weapons-grade nuclear fuel.

President Bush said Iran has the right to pursue nuclear power, but added that the Iranian people deserve much more, including political and economic freedom.

"Americans believe the future of Iran will be decided by the people of Iran," the president said. "And we believe that future can be one of progress, prosperity and achievement. We look forward to the day when our nations are friends, and when the people of Iran enjoy the full fruits of liberty, and play a leading role to establish peace in our world."

President Bush said he hoped to boost educational and cultural ties between Washington and Tehran, and noted plans to augment U.S.-funded radio and television broadcasts to Iran.

Speaking about his trip to the Austrian capital, Mr. Bush described U.S.-European cooperation as a key pillar in defeating terrorism worldwide.

The president said the United States and Europe must help strengthen fledgling democracies in Afghanistan and Iraq. He said more international aid is needed for both nations, and that pledges of assistance must be honored.