The United States says that the arrests of suspected al Qaeda members in Iran fell short of meeting US demands for a crackdown, as the Bush administration debated new steps to pressure Tehran.
The administration put off a high-level meeting on Iran policy amid signs of internal differences. Secretary of State Colin Powell said on contacts with Iran would continue, but other sources said the Pentagon wants to suspend all contact.
"Our policies are well-known and I'm not aware of any changes in policy (on Iran). We have contacts with them. They will continue," Mr Powell told reporters.
Defence Secretary Donald Rumsfeld, in a New York speech, reiterated current policy of avoiding contact with "the top two layers" of Iranian government. Low-level contacts have been held over issues including Iraq and Afghanistan.
Mr Rumsfeld cited the speed of the 1979 Islamic revolution and said, "maybe we'll be favourably surprised some day" by a more democratic government.
US officials said intelligence suggests senior al Qaeda members hiding in Iran had prior knowledge of the May 12th suicide bombings in Saudi Arabia that killed 34 people, including eight Americans.
White House spokesman Mr Ari Fleischer said the arrests of several suspected al Qaeda members announced by Iran on Monday did not quell concerns that group leaders were in the country.
Mr Fleischer said Iran has also failed to satisfy US concerns it is developing nuclear weapons, which Iran denies. Additionally, the United States has warned Iran not to meddle in post-war Iraq.