"In our talks with China it was agreed that tools such as sanctions have lost their effectiveness," he told reporters in Beijing. Have Your Say

In an hour-long phone call with Mr Hu, Mr Obama had stressed "the importance of working together to ensure that Iran lives up to its international obligations", the White House said.

International sanctions would not prevent Iran from pursuing its nuclear activities, he said.

Chinese officials have not commented after the talks.

China's foreign minister has said he still hopes the nuclear issue can be resolved through negotiations.

Western powers claim Iran seeks nuclear weapons, a charge Tehran denies.

Serious talks

Speaking in an interview broadcast on Friday, Mr Obama said if Iran obtained the ability to manufacture nuclear weapons, that would both destabilize the Middle East and trigger a regional arms race.

"We're going to ratchet up the pressure and examine how they respond but we're going to do so with a unified international community," he said.

During the phone call, Mr Hu had called for "healthy and stable" relations with the US, US officials said.

The two leaders also discussed Taiwan and the importance of implementing G20 agreements to boost economic growth.

The exchange signaled an easing of tensions between the two big powers, who have recently had high-profile disagreements over Tibet, trade and Taiwan.

But in the brewing confrontation between the West and Iran over its nuclear programme, China is now key to what happens next, says the BBC's Damian Grammaticas, in Beijing.

Earlier this week, Mr Obama said he wanted to see new UN sanctions on Iran "within weeks".

China, a veto-wielding UN Security Council member with strong ties to Iran, has in the past expressed reluctance to see new sanctions imposed.

However, the US ambassador to the UN, Susan Rice, said on Thursday China had indicated it was ready to hold "serious" talks with Western powers on a new UN resolution.

In February, the UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), said in a report that Iran's refusal to co-operate and answer questions about its nuclear programme raised concerns about the possible existence of "past or current undisclosed activities related to the development of a nuclear payload for a missile".

It also confirmed that Iran had produced 20% enriched uranium.

Tehran says it needs the more highly-enriched uranium for a research reactor producing medical isotopes, but Western powers fear it is heading towards enriching uranium to the 90% required for a weapon.

Strained ties

The US and China have disagreed recently over Tibet and Taiwan.

Mr Hu had warned Mr Obama not to antagonise Beijing on the issues, China's foreign ministry said.

"Hu stressed the Taiwan and Tibet issues concern China's sovereignty, territorial integrity, and China's core interests, and properly dealing with these issues is key to ensuring the healthy and stable development of Sino-US relations," said a ministry statement.

China was upset when Mr Obama met Tibet's spiritual leader, the Dalai Lama, in February. It was also angered by Taiwan securing a weapons deal from the US.

The US has also supported the internet search company Google in its concerns over censorship in China, and other trade rows persist.

However, Beijing did allow the visit of the aircraft carrier USS Nimitz to Hong Kong in February.

One issue where China and the US are in agreement is the need to bring North Korea back to the negotiating table over plans to end its nuclear programmes.