UPDATE 2-US Senate Republicans block Iran sanctions vote
* Republicans: need more time to examine bill
* Senators still expect sanctions to pass, timeline unclear (Adds comments from additional senators and aides, results of House vote on containment)
WASHINGTON, May 17 (Reuters) - U.S. Senate Republicans blocked legislation for new economic sanctions on Iran's oil sector on Thursday saying they needed more time to study the bill, a surprise move that drew anger from Democrats who wanted approval ahead of nuclear talks next week.
"I feel I've been jerked around," Democratic leader Harry Reid said on the Senate floor after Republicans said they could not immediately approve the bill.
Senate Republican leader Mitch McConnell said his staff did not receive a draft of the bill until late on Wednesday night, and needed more time to make sure it was as strong as possible.
"I don't think there is anything to be outraged about," he told Reid on the floor. "Why don't we get to work - work out the differences - and pass the resolution?"
Iran sanctions are politically popular and draw broad support from both sides of the political spectrum. The delay on the bill is one of many examples of partisan sniping that has stalled work in Congress ahead of November's presidential and congressional elections.
Senators from both parties said they still expect the sanctions will pass, although the timeline was not immediately clear.
The House of Representatives passed a version of the bill in December that is tougher than the Senate's in several areas. Differences would have to be worked out in the two versions before a final bill is sent to President Barack Obama.
The sanctions are meant to shut down any financial deals with Iran's powerful state oil and tanker enterprises, stripping Tehran of crucial oil revenues.
The revenues support Iran's nuclear program, which the United States says is a cover for developing the capability to build atomic bombs, while Iran says it is for civilian purposes.
The bill would build on penalties signed into law by Obama in December that threatened sanctions against foreign institutions trading with Iran's central bank.
Democrats wanted to pass the proposed penalties ahead of talks between world powers and Iran next week in Baghdad, aimed at ensuring Iran does not build a nuclear bomb.
'I WANT MORE ON THE TABLE'
Speaking on background, two Republican aides blamed Democratic leadership for failing to work out differences ahead of time. They said Reid went ahead with asking for unanimous agreement to pass the bill without a roll-call vote knowing that Republicans had concerns.
Two Democratic aides said the impasse came as a surprise. Reid found out Republicans would not support the bill only minutes before he asked for unanimous consent, one aide said.
Some Republicans said they wanted a stronger statement in the bill that the use of U.S. military force was an option in preventing Iran from building a nuclear bomb.
"These sanctions are great. I hope they will change Iranian behavior. They haven't yet, and I don't think they ever will," said Senator Lindsey Graham of South Carolina. "I want more on the table."
The draft bill included wording to gain support from Republican Senator Rand Paul by stating that nothing in the bill could be construed as a declaration of war or authorization of the use of military force against Iran or Syria.
Paul had blocked the bill in March over that issue.
Many senators, Democrats and Republicans, back a proposed resolution to reject the idea of "containment" of Iran if it does get the ability to make a bomb. Containment was the U.S. Cold War policy of containing, or checking, Soviet influence.
Democrats agreed to hold a separate vote on that resolution.
"Don't hold the sanctions legislation hostage," said Senator Robert Menendez, a Democrat and co-author of the bill, urging senators to pass the measure before leaving for the weekend.
The House on Thursday voted 401-11 to reject the idea of containment.
Opponents said the resolution by Republican Ileana Ros-Lehtinen, chairman of the House Foreign Affairs Committee, made war with Iran more likely by stating that containment of a nuclear-capable Iran would not be good enough.
"What? We haven't had enough wars?" demanded Representative Dennis Kucinich, a Democrat, in debate on the issue earlier in the week. "At a time when the U.S. is engaging in its first successful direct talks with Iran for years, it is more critical than ever for Congress to support these negotiations."
But Representative Howard Berman, also a Democrat, countered that the non-binding resolution simply expressed determination to prevent Iran from getting a bomb.
"It in no way can be interpreted as an authorization for use of military force," Berman said.
Israel insists that military action against Iran would be warranted to prevent it from reaching nuclear weapons capability, as opposed to when it actually builds a device.
The Obama administration has not embraced that idea. Obama, who has asserted that military action remains a last resort if sanctions and diplomacy fails, has only said that Iran must not be allowed to develop or acquire a nuclear weapon.
The sanctions bill had support from the American Israel Public Affairs Committee, a powerful pro-Israel lobby group.
U.S. officials have said that while Iran may be maneuvering to keep its options open, there is no clear intelligence that the country has made a final decision to pursue a nuclear bomb. (Additional reporting by Rachelle Younglai, Timothy Gardner and Susan Cornwell in Washington and Jonathan Saul in London; Editing by Russell Blinch and Vicki Allen)
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