Solving the Iranian nuclear issue requires the help of Arab countries neighboring the Islamic republic, IAEA chief Mohammed ElBaradei was quoted as saying Monday night. "I find it surprising that the Arab countries are not engaged in dialogue between Iran and the West. The neighbors, so far, have been sitting on the fence. Any solution to the Iranian issue has to engage the neighbors," Reuters quoted him as saying. He also said extremist groups possessing nuclear weapons or materials would be the "No. 1 security threat" facing the world in the coming years. ElBaradei said the Vienna-based UN agency needed more money to properly protect nuclear sources and to keep potentially lethal substances out of the hands of such groups. "Deterrence does not work in the case of extremist groups... because if they were to acquire a nuclear weapon or powerful radioactive source, they would simply use it," ElBaradei said in a speech to diplomats and politicians in Austria's parliament. In other comments, ElBaradei appeared hopeful the new US administration would make progress in resolving the international standoff surrounding Iran's nuclear program. Unlike his predecessor, George W. Bush, US President Barack Obama has called for diplomatic contacts with Iran as a way of persuading its rulers to drop their nuclear ambitions. Teheran says its nuclear program is solely for peaceful purposes. "I think an Iranian solution would be a win-win situation because Iran could be a positive force in the region - in Syria and Lebanon, in Iraq, in Palestinian territory," said ElBaradai, a Nobel Peace Prize laureate. He warned, however, that Iran could also be "a source of confrontation."