Clinton says Iran faces nuclear choice

Secretary of State Hillary Clinton speaks about the United States' agenda for the United Nations General Assembly at the Brookings Institution in Washington, September 18, 2009.

WASHINGTON (Reuters) - Iran should use next month's talks with major powers to ease fears over its nuclear program or risk greater isolation and economic pressure, U.S. Secretary of State Hillary Clinton said on Friday.

"We are serious and we will soon see if the Iranians are serious," Clinton said in a speech at the Brookings Institution, a Washington think tank.

"We have made clear our desire to resolve issues with Iran diplomatically. Iran must now decide whether to join us in this effort," Clinton said, adding that there could be profound consequences for failure to act.

"There will be accompanying costs for Iran's continued defiance: more isolation and economic pressure, less possibility of progress for the people of Iran," Clinton said.

The United States has agreed to take part in talks on October 1 between Iran and the so-called "P5+1," which includes the five permanent members of the U.N. Security Council -- Britain, China, France, Russia and the United States -- and Germany.

The meeting is seen as a move toward President Barack Obama's pledge during last year's U.S. presidential campaign to try to improve relations with Iran through more direct contacts. The two countries have not had diplomatic ties since 1980.

Clinton repeated the U.S. position that the talks must address Iran's uranium enrichment program, which Tehran says is geared toward energy production but which some global powers fear is a cover for developing nuclear weapons.

Iran repeatedly has said that it will not use the October talks to bargain over its nuclear capabilities.

Clinton said the face-to-face meeting between U.S. and Iranian negotiators would provide a chance to assess Tehran's attitude, but that Washington was "not in this just for the sake of talking."

'GROWING CONCERNS'

"We remain ready to engage with Iran, not as an end in itself, but as a means of addressing the growing concerns that we and our partners have about Iran's actions, especially on the nuclear issue," she said.

Former U.S. President George W. Bush resisted direct talks with Iran over the nuclear issue and relented only in July 2008 when he sent a senior diplomat to join the major powers in a meeting with Iranian officials in Geneva.

Clinton suggested this policy was a failure.

"For many years we outsourced our policy and concerns about the nuclear program to others," Clinton said.

"We were on the sidelines. We were pacing up and down the sidelines extremely agitated and we were ... trying to figure out how to get other people to go on the field and deal with this problem and look where we are today. We are, you know, really nowhere," she added with a laugh.

Iranian President Mahmoud Ahmadinejad on Friday further alienated the United States and other Western nations by calling the Holocaust "a lie based on an unprovable and mythical claim."

Ahmadinejad's comments came a day after Obama scrapped a Bush-era missile defense plan for Europe in favor of a new strategy to defend against Iran's short- and medium-range missiles.

The United States and its European allies have floated the idea of putting sanctions on Iran's fuel imports if it fails to enter talks on its nuclear program. While Iran is the world's fifth-largest crude exporter, it still imports up to 40 percent of its gasoline supplies as it lacks refining capacity.

U.S. Ambassador to the United Nations Susan Rice said on Friday that the "P5+1" group would meet at the ministerial level on the sidelines of next week's U.N. General Assembly meeting in New York -- which will also hear speeches from both Obama and Ahmadinejad.

Clinton said Washington still hoped for movement on Iran's nuclear program by the end of the year.

"We're going to move forward, see what -- if any -- changes in approach, attitude, actions the Iranians are willing to entertain and continue to work with our allies ... on the consequence side of the ledger," she said.

(Additional reporting by Arshad Mohammed and Matt Spetalnick; Editing by Will Dunham)