* Dead scientist's funeral sees anger at U.S., Israel
* Iranian leaders vow not to abandon nuclear research
* Hitman's target procured nuclear supplies -state radio
* Japanese premier casts doubt on U.S.-led oil embargo (Adds U.S., Russian diplomats, Netanyahu, sanctions moves)
By Mitra Amiri and Robin Pomeroy
TEHRAN, Jan 13 (Reuters) - The Tehran funeral on Friday of a nuclear scientist blown up by a hitman saw the ruling clergy urge Iranians to rally behind it at a forthcoming election and face down Western and Israeli threats against Iran's nuclear programme.
Underscoring the global reach of the standoff, the United States imposed sanctions on a Chinese state-run energy firm for trading with Iran and assured Israelis it was ready to use force to stop Tehran acquiring nuclear weapons; but Moscow warned that it would view any attack on Iran as a threat to Russia.
Israeli Prime Minister Benjamin Netanyahu, often seen as a hawk on military action, said, however, he saw new grounds to hope that Tehran could be persuaded to change tack by sanctions, through which, he said, "for the first time, I see Iran wobble."
In a mood of high emotion in a Tehran beset by U.S. and European sanctions and fears of war, hundreds of mourners followed the flag-draped coffin of Mostafa Ahmadi-Roshan through the streets of the capital, two days after he and his driver were killed by a motorcycle assassin in rush-hour traffic.
"Death to America! Death to Israel!" chanted the crowd streaming away from weekly prayers at Tehran University, where the dead man was hailed as a martyr in the tradition of Imam Hussein, a revered figure for Iran's Shi'ite branch of Islam.
"Nuclear energy is our absolute right!" young men chanted.
State radio described the 32-year-old chemical engineer, as having worked on procurement for the uranium enrichment plant at Natanz. That disclosure may strengthen suspicions he was targeted by Israeli and Western agencies, who say that some covert Iranian purchases confirm their scepticism of Tehran's assertion that it is not seeking to develop atom bombs.
With popular discontent growing over economic hardship and, among some, the lack of political freedoms, the clerical elite has portrayed Western hostility toward Iran's leaders and their avowedly peaceful nuclear energy programme as a spur to national unity and for suppression of dissident voices.
Ayatollah Mohammed Emami-Kashani told worshippers Ahmadi-Roshan's assassination - the latest of several attacks blamed on foreign agents - should encourage voters not to heed opposition calls to boycott a parliamentary election on March 2.
Though dissenters cannot take part, the vote will be a first test for an increasingly fractured leadership since big street protests followed the re-election of President Mahmoud Ahmadinejad in August 2009 and since popular uprisings against autocracy hit Iran's Arab neighbours, including ally Syria.
"The nation should wake up," Emami-Kashani said in his sermon, repeating a warning by Supreme Leader Ayatollah Ali Khamenei that Iran's Western enemies were plotting to use the election to destabilise the 32-year-old Islamic Republic.
"All the people should be united," he said.
Ahmadi-Roshan was to be interred at a shrine close to a fellow nuclear scientist assassinated in the same way two years ago, on Jan. 12, 2010. Some Iranians have called for reprisals.
Ahmadinejad, away on a tour of Latin America, said: "Once again the dirty hands of arrogance and the Zionist elements have deprived our scientific and academic community of the graceful presence of one of our young intellectuals and scientists."
He said it would, however, only stiffen Iran's resolve.
Israel, which has floated threats of military action to thwart any Iranian nuclear weaponry, has made no comment on the killing. Presumed owner of the Middle East's only atomic arsenal, Israel has a history of killing enemies abroad and had warned Iran only this week to expect more "unnatural" mishaps if it pursued its research and development in nuclear science.
Some Iranians have called for reprisals against Israel.
The United States, sympathetic to its ally's view that an Iranian atomic bomb could threaten the Jewish state's existence, has strenuously denied killing the scientist and says it is sticking to economic sanctions to change Tehran's mind.
In a rare upbeat comment on the prospect of international sanctions having the effect Israel desires, Netanyahu told The Australian newspaper: "For the first time I see Iran wobble ... under the sanctions that have been adopted, and especially under the threat of strong sanctions on their central bank".
"If these sanctions are coupled with a clear statement from the international community led by the U.S. to act militarily to stop Iran if the sanctions fail, Iran may consider not going through the pain. There's no point in gritting your teeth if you're going to be stopped anyway. In any case, the Iranian economy is showing signs of strain."
While Washington enjoys support in Europe for its sanctions strategy, world powers China and Russia have urged caution.
China, the biggest customer for Iranian oil, has shown little enthusiasm for Obama's efforts this month, via the globe-spanning U.S. dollar banking system and direct diplomacy, to cut Tehran's ability to fund itself through oil exports.
The United States on Thursday imposed sanctions on China's state-run Zhuhai Zhenrong, Corp, which it said was Iran's largest supplier of refined petroleum products.
Russia, too, which operates Iran's only nuclear power station, has been cool to the latest Western measures.
Russian Deputy Foreign Minister Gennady Gatilov offered some sympathy for Iranian leaders' view that sanctions and threats of force are less about the nuclear programme than toppling them: "Additional sanctions against Iran as well as a possible military operation against it will undoubtedly be perceived by the international community as pursuing 'regime change' in Tehran," Gatilov was quoted as saying on his ministry's website.
Another senior Russian official, the hawkish outgoing envoy to NATO Dmitry Rogozin, cautioned further that Moscow would view an attack on its southern neighbour Iran as a threat to Russia:
"Iran is our neighbour," Rogozin said. "And if Iran is involved in any military action, it's a direct threat to our security ... We are definitely interested in the non-proliferation of weapons of mass destruction ... But at the same time, we believe that any country has the right to have what it needs to feel comfortable, including Iran."
Washington's envoy in Tel Aviv assured Israelis, who fear an Iranian bomb would threaten their existence, that U.S. forces were making preparations that would give Obama the option of military action to halt Iran's nuclear programme - and he dismissed suggestions Obama was timing decisions on the Iran crisis with a view to his campaign for re-election in November.
"Iran is continuing to violate gravely its international commitments, and since achieving the shared goal is so important, then it should be clear that all options are open," U.S. ambassador Dan Shapiro told Israel's Maariv newspaper.
"We are guaranteeing that the military option is ready and available to the president at the moment he decides to use it.
"The president is resolute and clear in his statements, to prevent the Iranian nuclear threat from becoming a reality."
U.S. and European efforts to impose an oil embargo have been proceeding, though many countries fear that to stop purchasing Iranian crude could badly hurt their own economies.
Japan's policy on Iranian oil was left in doubt on Friday after the prime minister distanced himself from his finance minister's pledge to reduce oil imports in support of the U.S. push to prevent Iran from making nuclear weapons.
The standoff over the nuclear programme, including a threat by Iran to block the Gulf oil shipping lanes and a U.S. warning of naval action to keep them open, has sent world oil prices higher and fueled fears of a major conflict in a region already electric with tension between an array of competing interests.
However, analysts and diplomats also note that rhetoric and symbolic actions are not new, and that diplomacy has defused previous crises before an outbreak of conflict that probably would not serve the interests of any of the established powers.
One Western diplomat who follows negotiations on Iran's nuclear programme closely said: "I'm completely unable to say which way the situation will develop.
"If you constantly get diverging statements and decisions from various parts of the Iranian regime it is difficult to say how far it is intentional and how much it is a result of the internal competition and the fact that it is a country with multiple centres of power."
Western diplomats say that Iran will need to show genuine readiness to address mounting suspicions about its nuclear programme at rare talks with senior U.N. officials this month to convince a sceptical West that it is not just playing for time.
A high-level team from the U.N. atomic watchdog IAEA is expected to visit Tehran later this month to discuss its growing concerns, according to diplomatic sources.
This week, Iran's announcement that it was enriching uranium at a new and potentially bombproof underground plant, as well as the sentencing to death of an Iranian-American dual-national for spying, have added to friction with the Western powers.
However, last month Tehran also renewed an invitation for the senior IAEA team to visit Iran. And it has signalled a readiness to resume talks with big powers that have been frozen for a year over its refusal to discuss suspending enrichment. (Additional reporting by Ramin Mostafavi and Zahra Hosseinian in Tehran, Stanley White in Tokyo, Fredrik Dahl in Vienna, Ori Lewis and Crispian Balmer in Jerusalem, Sebastian Moffett in Brussels and Alexei Anishchuk in Moscow; Writing by Alastair Macdonald; Editing by Myra MacDonald)