Silva's comments followed a three-hour private meeting with his increasingly alienated Iranian counterpart, President Mahmoud Ahmadinejad—the first Iranian leader to visit Brazil since pro-U.S. Shah Mohammad Reza Pahlavi toured Brazil in 1965.

But Ahmadinejad made no promises and defiantly said Iran would try to improve its uranium-enrichment technology if it can't buy enriched uranium abroad.

"If the people ask us to produce ourselves, we should do it and the opportunity we tried to create for the other side will be lost," Ahmadinejad told reporters.

The two leaders didn't say whether they discussed Iranian war games that started a day earlier, driving oil prices higher.

Ahmadinejad's comments on uranium enrichment came less than a week after Iran indicated it would not export its enriched uranium for further processing, effectively rejecting the latest plan brokered by the International Atomic Energy Agency and aimed at delaying Iran's ability to build a nuclear weapon.

Under the IAEA plan, Iran would export its uranium for enrichment in Russia and France where it would be converted into fuel rods, which would be returned to Iran about a year later. The rods can power reactors but cannot be readily turned into weapons-grade material.

While Silva said on his weekly radio show that there's good reason not to isolate Iran, he also suggested—but did not insist—that Ahmadinejad could work harder to negotiate the stalemate over the nation's nuclear program.

"I encourage your excellence to continue engagement with interested nations in order to find a fair and balanced solution to the Iranian nuclear question," the Brazilian leader said.

For Ahmadinejad, the visit to Brazil could provide some measure of political legitimacy for his nation as it engages in large-scale war games aimed at protecting its nuclear facilities from attack and refuses to back down from developing a nuclear program. And for Brazil, it helps boost the nation's growing political clout.

Oil prices rose above $78 a barrel Monday amid deepening tensions in the Middle East following the start of the war games and boasts by an air force commander that Iran could deter any military strike by Israel.

Silva, who again defended Iran's right for a peaceful nuclear program, gave Ahmadinejad a big bear hug and called for diplomacy to push for peace in the Middle East and ease tensions between Iran, the United States and other nations.

"There's no point in leaving Iran isolated," the Brazilian leader said on his radio program hours before the two met. "It's important that someone sits down with Iran, talks with Iran and tries to establish some balance so that the Middle East can return to a certain sense of normalcy."

Ahmadinejad didn't utter the word Israel during his comments, but said that Iran wants a Middle East with "prosperity, progress and security for all nations."

Ahmadinejad is the third high-ranking Middle Eastern leader to visit Brazil in recent weeks. Israeli President Shimon Peres and Palestine Authority chief Mahmoud Abbas were here shortly before him. During his radio show, Silva proposed a soccer game next March pitting Brazil's national team against a team comprising Israelis and Palestinians.

Silva, a deft negotiator whose skills were honed as a union leader, says a new tact is needed with the Iranians that shouldn't be as punitive as the U.S. or European approach.

The Iranian leader will next visit allies in Bolivia and Venezuela to shore up more South American support.

"With Brazil he gets more bang for his buck in the sense you're getting legitimacy from a more mainstream player," said Daniel Brumberg, an Iran expert at the Washington-based United States Institute of Peace. "One would hope Brazil's diplomacy would be skillful enough to get certain types of messages across to the Iranians and not just give Ahmadinejad the red-carpet treatment."

Several dozen Ahmadinejad supporters and opponents held demonstrations in Brasilia on Monday, a day after about 500 people gathered at Rio de Janeiro's Ipanema Beach to protest his visit.

The Iranian leader has called for the destruction of Israel and repeated in an interview Sunday with Brazil's Globo TV that homosexuality goes against human nature.

Israel is voicing concern about Iran's push in Latin America. Israeli Foreign Minister Avigdor Lieberman visited Brazil and Argentina in July and Israeli President Shimon Peres visited the same nations last week—the first such high-level visits in decades.

Brazil has the world's seventh-largest uranium reserves and enriches it for its own nuclear energy program. The nation has flatly said it would not sell enriched uranium to Iran, or any other nation.

In addition to encouraging Brazil to press Iran on its uranium enrichment, the U.S. State Department said it hopes Brazil raises the case of three American hikers being held in Iran after they crossed an unmarked border while hiking in Iraqi Kurdistan in July. Ahmadinejad and Silva didn't mention the hikers.
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