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Stepping up the heat on Iran's leaders at an impromptu appearance in the White House briefing room, Obama said the United States and five other world powers were "moving along fairly quickly" to tighten the screws on Tehran.
He indicated that his administration had made headway in persuading Russia to overcome its traditional resistance to imposing new sanctions on Iran, even if he was uncertain about whether China would join the other powers.
China now appears to be the sole holdout on sanctions among the five veto-wielding members of the UN Security Council -- the other four are the United States, Russia, Britain and France.
Germany is the sixth power involved in the negotiations, but is not a Security Council permanent member.
Iran announced on Tuesday it has begun work to enrich uranium to 20 per cent, which it says is for a medical research reactor in Tehran.
The move suggested Iran was spurning a four-month-old proposal by the UN's International Atomic Energy Agency (IAEA) to ship most of its stocks of 3.5-per cent enriched uranium abroad to be further upgraded to fuel the reactor.
Experts say that once Iran enriches uranium to 20 per cent, it can proceed to the 93 per cent needed to produce nuclear weapons since the technology is the same. Iran maintains the enrichment is purely for civilian energy purposes.
"Despite the posturing that the nuclear power is only for civilian use... they in fact continue to pursue a course that would lead to weaponisation, and that is not acceptable to the international community," Obama said.
After trying to engage Iranian leaders and persuade them to accept the IAEA deal to defuse the crisis, Obama said the world must be prepared to pressure Iran to change course, even if the "door is still open" to negotiations.
The world community "has bent over backwards" to accommodate Iran and yet is still ready to accept the Islamic Republic as a member of "good standing," he said.
"What we are going to be working on over the next several weeks is developing a significant regime of sanctions that will indicate to them how isolated they are from the international community as a whole," Obama said.
In Moscow, the powerful head of Russia's national security council, Nikolai Patrushev, said Tehran's announcement that it had started work to produce 20 percent enriched uranium cast doubt on its claims not to be pursuing weapons.
Patrushev indicated the Kremlin's patience in trying to seek dialogue with Tehran was wearing thin.
"Political and diplomatic methods are important for regulating, but everything has its limit," Patrushev was quoted as saying by Russian state news agencies.
Keeping up the pressure on Iran, State Department spokesman Philip Crowley said the United States would propose to the IAEA an alternative to allow Tehran to obtain the medical isotopes it says it needs for cancer patients.
The world community was ready to work constructively to meet any "specific need" Iran has and would "facilitate Iran's procurement of medical isotopes from third countries," Crowley told reporters without elaborating.
Ahmet Davutoglu, the foreign minister of Turkey, a country with good ties with both Iran and the West, is to visit Iran next week to push for a diplomatic solution to the stand-off.
But US Defense Secretary Robert Gates "thinks this is a matter of weeks, not months," Pentagon spokesman Geoff Morrell told reporters in Paris, where Gates met French President Nicolas Sarkozy.
US officials have discussed sanctions targeted at Iran's Revolutionary Guard, which is responsible for the country's nuclear program and is behind the crackdown on anti-government protests there.
The loudest call for sanctions came from Israel where Prime Minister Benjamin Netanyahu called for "crippling" measures against Tehran during a gathering of European Union ambassadors in Jerusalem.
Analyst Karim Sadjadpour predicted "China will ultimately conclude that the the potential costs of supporting diluted sanctions is less than the potential costs of being the lone holdout."
From an economic perspective, the Carnegie Endowment for International Peace analyst told AFP, Iran needs China more than the other way around.
Sadjadpour said diluted sanctions would still have an impact.
"The Security Council sanctions are more important politically than economically, because they make clear this is not simply a Western front against Iran." Sadjadpour said.
"The more consequential sanctions will come out of Europe and the United States."
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