Powers wield sanction threat after Iran stalemate

GENEVA (Reuters) - Major powers gave Iran two weeks to answer calls to rein in its nuclear programme on Saturday or face tougher sanctions after talks ended in stalemate despite unprecedented U.S. participation.

A U.S. State Department spokesman said Washington hoped Iran now understood that it had a choice between cooperation and "confrontation, which can only lead to further isolation".

But prospects of ending a row that has triggered regional tensions and rattled oil markets looked dim as Iran's top nuclear negotiator insisted Tehran would not even discuss a demand to freeze uranium enrichment at the next meeting.

"We still didn't get the answer we were looking for," European Union foreign policy chief Javier Solana said after some six hours of talks in Geneva with Iran's Saeed Jalili and envoys from the United States, Russia, China, France, Germany and Britain -- the so-called sextet of world powers.

Solana said he hoped for a clear answer from Tehran in around two weeks to a month-old sextet offer of trade and technical incentives to halt enrichment.

Asked whether Tehran would otherwise face a new round of the U.N. Security Council sanctions that analysts say are already beginning to bite on its economy, he told a news conference:

"The Iranians know very well what will continue to happen if nothing happens otherwise."

Diplomats said the presence of senior U.S. envoy William Burns at the talks underlined the unity of major powers in the dispute, and stressed that patience was running out with Iran.

"There is nothing more to talk about. The Iranians are running the risk of foreclosing their options," said one diplomat in Gevena, warning they risked "going down the path which means further measures in the EU and the U.N."

Solana said he hoped for more contacts with Iran "telephonically or physically", but officials made clear that any subsequent contacts would be at a lower level than Saturday's talks.

COOPERATION OR CONFRONTATION

In Washington, State Department spokesman Sean McCormack said: "We hope the Iranian people understand that their leaders need to make a choice between cooperation, which would bring benefits to all, and confrontation, which can only lead to further isolation."

The U.N. has imposed three sets of sanctions on Iran in a stand-off that goes back to the revelation in 2002 by an exiled opposition group of the existence of a uranium enrichment facility and heavy water plant in the country.

Those political and economic sanctions already target the country's banks and include visa bans on officials and measures against companies seen as linked to the nuclear programme.

Iran, the world's fourth-largest oil producer, rejects suspicions that it wants the atom bomb and says its nuclear programme is intended to generate electricity.

Asked by Reuters if Tehran would consider a demand to suspend enrichment as a precondition for full negotiations on its nuclear programme, Saeed Jalili said: "We will only discuss common points of the package."

In a bid to kickstart those negotiations, world powers have also proposed that Tehran first freeze expansion of its nuclear programme in return for the U.N. Security Council halting further sanctions measures.

But a senior Iranian diplomat ruled that out too.

"Of course we will not discuss the freeze-for-freeze topic in the next meeting with Solana ... The freeze-for-freeze issue cannot be accepted because this (enrichment) is our right and we will never abandon our nuclear right.

The high-level U.S. participation in the meeting, together with Iranian comments playing down the likelihood of an attack by the United States or Israel, had earlier in the week raised hopes of progress and helped lower oil prices from record highs.

Yet that optimism was tempered even before the meeting as both the United States and Iran insisted their policy would not change.

By Mark John and Parisa Hafezi

Reuters, India.