Iran defies sanctions as West plans harsher measures

UNITED NATIONS/LONDON (Reuters) - Britain led calls on Thursday for harsher penalties to be imposed on Iran, as Tehran defied a compromise U.N. sanctions resolution to punish it for its suspected nuclear weapons programme.

The Security Council approved a fourth round of sanctions in as many years on Wednesday, but Iran said it would go ahead with uranium enrichment and President Mahmoud Ahmadinejad said the U.N. resolution should be thrown "in the waste bin."

The 15-nation council passed a resolution that was the product of five months of talks between the United States, Britain, France, Germany, China and Russia. With 12 votes in favor, it received the least support of the four sanctions resolutions adopted since 2006.

Western diplomats argue it gives the EU, United States and allies a legal basis to impose their own much tougher measures.

"I think it is very important that the European Union does take further measures, that we show the European Union is prepared on this subject and others to use its weight in the world," British Foreign Secretary William Hague said.

U.S. Defense Secretary Robert Gates said shortly before the U.N. vote it could clear a way for individual states and the EU to block foreign firms expanding Tehran's oil and gas exports and impose other curbs on business activity.

The diluted U.N. resolution spares Iran's energy sector.

U.S. President Barack Obama said: "We will ensure that these sanctions are vigorously enforced, just as we continue to refine and enforce our own sanctions on Iran."

The resolution passed despite "no" votes from Turkey and Brazil. "We would not want to participate in such a mistake because history will not forgive us," Turkish Prime Minister Tayyip Erdogan told Arab League ministers on Thursday.

"Isolation is not the solution to Iran's problems."

He said Turkey intended, with Brazil, to continue engaging Tehran, having last month secured a nuclear fuel swap deal that they had hoped would head off sanctions.

Erdogan also announced plans to form a regional free trade zone with Jordan, Lebanon and Syria.

Such moves will add to concerns the pivotal Western ally could be lurching eastward in its alignment.

MISSILE DEAL

Russia, often reluctant in the past to follow the West's lead on Iran, said on Thursday the new U.N. sanctions did not oblige it to scrap a controversial deal to deliver surface-to-air missiles to Iran.

The Interfax news agency had earlier cited a Russian arms industry source as saying Moscow would freeze its contract to sell the S-300 missiles to Iran because of the sanctions.

Israeli Prime Minister Benjamin Netanyahu praised the new sanctions as a "positive step.

"We hope that this positive step will be followed by decisive actions by other countries, including sanctions targeting Iran's energy sector," he said.

"This resolution warns Iran that the world's leading countries are opposed to its nuclear programme," he said. "The biggest threat to peace is that the world's most dangerous regimes arm themselves with the most dangerous weapon."

Israel, whose jets bombed an Iraqi nuclear reactor in 1981 and what it said was a nuclear facility in Syria in 2007, has hinted it could use force to deny Iran the means to build an atomic bomb.

IRAN DEFIANT

Iran's envoy to the U.N. nuclear watchdog in Vienna said the sanctions would not undermine a nuclear programme it insists is for purely civilian purposes.

"Nothing will change. The Islamic Republic of Iran will continue uranium enrichment activities," Ambassador Ali Asghar Soltanieh said.

President Mahmoud Ahmadinejad said sanctions were "the same as pesky flies.

"These resolutions have no value ... it is like a used handkerchief that should be thrown in the waste bin," he added.

The sanctions resolution calls for measures against new Iranian banks abroad if a connection to the nuclear or missile programs is suspected, as well as vigilance over transactions with any Iranian bank, including the central bank.

It expands a U.N. arms embargo against Tehran and blacklists three firms controlled by Islamic Republic of Iran Shipping Lines and 15 belonging to the Islamic Revolutionary Guard Corps. The resolution also calls for setting up a cargo inspection regime similar to one in place for North Korea.

"The sanctions aren't crippling by any means," said Mark Fitzpatrick of the International Institute for Strategic Studies in London, "and are unlikely to change any minds in Tehran but they won't pass unnoticed either."

He said their effectiveness would depend on implementation, in the past sometimes lax on the part of Russia and China.

Pakistan said a $.7.6 billion project to export Iranian natural gas to Pakistan would be unaffected by the new steps.

EU diplomats said European states planned to use the U.N. move to impose their own unilateral sanctions and could agree on them in July.

The restrictions would target a number of Iranian banks and insurance companies, particularly those involved in trade finance, as well as more units of Iranian shipping group Irisl.

The companies would in effect be added to a U.N. blacklist of firms whose assets around the world are frozen on suspicion of providing aid to Tehran's nuclear or missile programmes.

In Washington, House of Representatives Foreign Affairs Committee Chairman Howard Berman predicted Congress would pass additional sanctions this month.

(Additional reporting by Sylvia Westall and Fredrik Dahl in Vienna, Joseph Nasr in Jerusalem and Guy Faulconbridge and Steve Gutterman in Moscow; editing by Andrew Roche)