U.S. Defense Secretary Robert Gates met with Defense Minister Amir Peretz in Tel Aviv on Wednesday, saying diplomatic efforts to resolve the standoff with Iran over its nuclear program are working.

At a joint press conference with Peretz, Gates said the men agreed that the diplomatic pressure is working. "We agreed it was important to deal with the Iranian nuclear problem through diplomacy, which appears to be working," Gates said.

Peretz told reporters during the press conference that "2007 will be a critical year for thwarting the Iranian plans."

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"Iran presents a threat not only to Israel, but to the entire free world," he said. "This problem is of concern to all of us and we are certain that the world will not stand aside."

"We expect that the U.S. and the world will stand by us regarding the Iranian nuclear issue," he added. "I congratulate the U.S. on the Security Council decision regarding sanctions."

While Peretz welcomed the diplomatic efforts, the defense minister said Israel could not rule out using other options.

Gates will meet with Prime Minister Ehud Olmert and Foreign Minister Tzipi Livni on Thursday, in the first visit by a U.S. defense secretary in eight years.

"The fact that I have come here in the end of my fourth month as secretary illustrates the importance that I attach to our relationship with Israel," Gates said.

The meeting between Gates and Peretz focused on a number of issues: the Iranian threat, the implications of the ongoing fighting in Iraq, the recent Syrian statements that were hostile to Israel, and the defense ties between the U.S. and Israel.

Gates noted that the UN Security Council has already passed two resolutions imposing sanctions on Iran for its refusal to suspend uranium enrichment, a process that can be used to develop nuclear weapons. Gates said the diplomatic efforts should be given a chance to succeed.

"The international community is united in telling Iran what it needs to do with respect to its nuclear program," he said. "These things don't work overnight, but it seems to me clearly the preferable course to keep our focus on the diplomatic initiatives, and particularly because of the united front of the international community at this point."

However, a secret International Atomic Energy Agency document obtained by news agencies Wednesday revealed that Iran has begun making nuclear fuel in its underground uranium enrichment plant, and has started up more than 1,300 centrifuges.

The American defense secretary criticized Syria's policies and positions. "While he have diplomatic relations with Syria, that does not mean that we are happy with what they are doing," he said.

Gates expressed concern over ongoing weapons transfers from Syria to Hezbollah, as well as the fact that Syria is not preventing militants from crossing into Iraq.

The defense secretary refused to respond to questions on how the U.S. views the results of the Second Lebanon War, and whether the American administration was disappointed by the Israel Defense Forces performance during the war.

"Fortunately for me, I was not the secretary of defense last number, and I therefore exempted from answering."