He urged Congress to hold off imposing a new round of sanctions against the Islamic republic while negotiators try to work out a 6-month agreement that would freeze Iran's nuclear program in exchange for some sanction relief.
"Let's test how willing they are to actually resolve this diplomatically and peacefully," Obama told reporters at the White House. "We will have lost nothing if at the end of the day it turns out that they are not prepared to provide the international community the hard proof and assurances necessary for us to know that they're not pursuing a nuclear weapon."
"And, if [that] turns out to be the case, then not only is our entire sanctions infrastructure still in place, not only are they still losing money from the fact that they can't sell their oil and get revenue from their oil as easily, even throughout these talks," Obama said, "but other options remain."
After negotiators from the United States and five other countries came close to such a deal during the weekend in Geneva, Switzerland, Obama said it did not make sense "to add new sanctions on top of the sanctions that are already very effective and that brought them to the table in the first place."
If not, "the sanctions can be ramped back up," he said.
Obama said terms of the interim deal under discussion United States would offer "very modest relief at the margins of the sanctions that we've set up" and Iran would halt its nuclear program, dilute its stockpile of uranium and be subjected to more inspections, giving both sides a chance to negotiate a more comprehensive deal.
The next round of negotiations on Iran's nuclear program -- which it says is for peaceful purposes and Western leaders say is to develop nuclear weapons capability -- is set for Nov. 21-22 in Geneva.
More importantly, Obama said, the interim agreement would leave in place the core sanctions that have effectively crippled the country's economy -- oil sanctions and financial-related sanctions.
Secretary of State John Kerry, in a briefing Wednesday before the Senate Banking, Housing and Urban Affairs Committee, urged the panel against moving forward on a new round of sanctions even as Western diplomats were discussing whether to ease current sanctions against the Islamic republic as an inducement for concessions on its controversial nuclear program, The New York Times reported.
After meeting with administration officials, including Biden and Kerry, Sen. Charles Schumer, D-N.Y., the third-ranking Democrat, said he was "dubious of the proportionality of the deal. While I am exploring further details, I am worried that we are reducing sanctions while Iran is not reducing its nuclear capabilities."
"I hope we can work something out with Iran, but I am a person who really believes in the state of Israel," Reid said. "Our concern over here in dealing with the nuclear capability of Iran is one thing. Put your mind-set that you're in Israel. There are not thousands of miles separating you. It's scores of miles. What we do has to be done right."
Notable deaths of 2014 [PHOTOS]