Obama says he wants progress with Iran by year's end

WASHINGTON (Reuters) - U.S. President Barack Obama set a rough timetable for his diplomatic outreach to arch-foe Iran for the first time on Monday, saying he wanted to see serious progress by the end of the year.

He also held out the prospect of tougher sanctions against Tehran "to ensure that Iran understands we are serious."

Obama's comments came after talks with Prime Minister Benjamin Netanyahu in which the new Israeli leader was expected to stress Israel's concerns about Iran's nuclear program. Israel believes it is a cover to build atomic weapons.

With many Israelis skeptical about his efforts to engage Iran diplomatically, Obama stressed that attempts by the previous Bush administration to isolate Iran had failed, "so what we are going to try to do is do something different."

Sitting next to Netanyahu in the Oval Office, Obama said he hoped to begin negotiations with Tehran soon, after Iran holds elections next month. Iran's leaders have so far rebuffed his efforts to reach out to them and toughened their rhetoric.

"The important thing is to make sure there is a clear timetable, at which we point we say these talks don't seem to be making any serious progress," Obama said.

"By the end of the year we should have some sense whether or not these discussions are starting to yield significant benefits, whether we are starting to see serious movement on the part of Iranians," he said.

He did not say what steps he expected Iran to take to show its good faith in any negotiations with Washington.

He stressed that he was not shutting the door on a "range of steps" against Iran, including tougher sanctions, if it continued its nuclear program, which Tehran says is for the peaceful generation of electricity.

(Additional reporting by David Alexander and Matt Spetalnick, editing by Sandra Maler and Cynthia Osterman)