Bush: Iran 'held hostage' by clerical elite

WASHINGTON, Jan 31 (Reuters) - President George W. Bush said on Tuesday that Iran was "held hostage" by clerical leaders who repress their people, and urged the world not to allow Tehran to gain nuclear weapons.

In his State of the Union address, Bush also accused Iran of sponsoring terrorists in the Palestinian territories and Lebanon and said, "that must come to an end."

U.S. Secretary of State Condoleezza Rice had earlier said she was confident Russia and China would support sending the Iran nuclear case to the U.N. Security Council but said she expected differences over what steps to take. The council could impose sanctions but these penalties are unlikely to be the first response.

"The Iranian government is defying the world with its nuclear ambitions -- and the nations of the world must not permit the Iranian regime to gain nuclear weapons," Bush said.

"America will continue to rally the world to confront these threats," he said.

Iran rejects accusations that it is trying to build a nuclear bomb, and says it will not give up its right to nuclear technology for peaceful purposes.

Four years ago in his State of the Union address, Bush named Iran along with North Korea and Iraq as countries that, with their "terrorist allies, constitute an axis of evil, arming to threaten the peace of the world."

There was no such fierce rhetoric in Tuesday's speech, although Bush described Iran as "a nation now held hostage by a small clerical elite that is isolating and repressing its people."

Bush said he was speaking directly to the Iranian people to let them know the United States supported them.

"America respects you, and we respect your country," Bush said. "We respect your right to choose your own future and win your own freedom. And our nation hopes one day to be the closest of friends with a free and democratic Iran," he said.

But Bush did not say how this could be accomplished, despite pressure from some U.S. officials and Republican allies outside the administration who have been pushing for stronger overt and covert initiatives to encourage political change.

In the speech, Bush reiterated that the United States supported democratic reforms across the Middle East.

On the victory by the militant group Hamas in the Palestinian parliamentary election last week, he said the group must now recognize Israel, disarm and work for peace. Hamas is committed to the destruction of Israel.

Bush also pointed to Saudi Arabia as having taken the first steps of reform, "now it can offer its people a better future by pressing forward with those efforts."

While Egypt had a multi-party presidential election, the government should now "open paths of peaceful opposition that will reduce the appeal of radicalism," he said.