* Panetta says sanctions having impact on Iran
* Says U.S. will not tolerate Iran developing nuclear arms
By Phil Stewart
TUNIS, July 30 (Reuters) - U.S. Defense Secretary Leon Panetta said on Monday Western sanctions against Iran over its nuclear programme were working even if the impact on decision-making in Tehran was not obvious at the moment.
Panetta made his comments ahead of a visit this week to Israel, which has said the sanctions had failed to stop Iran's nuclear programme and warned that time was running out before Iran achieves a "zone of immunity" in which Israeli bombs cannot penetrate deeply buried uranium enrichment facilities.
Panetta, asked by reporters in Tunisia about concerns in Israel over the effectiveness of sanctions, said they were having a serious impact "in terms of the economy of Iran."
"And while the results of that may not be obvious at the moment, the fact is that they have expressed a willingness to try to negotiate with the P5+1, and they continue to seem interested in trying to find a diplomatic solution," Panetta said, referring to diplomatic efforts by the five permanent U.N. Security Council members and Germany.
Widely believed to be the only Middle Eastern country with a nuclear arsenal, Israel is determined to stop hostile neighbours acquiring weapons that it fears could be used to wipe out the Jewish state.
Talks between world powers and Iran to resolve the standoff have so far failed to secure a breakthrough and U.S. Secretary of State Hillary Clinton said in July that Iran's proposals so far within the P5+1 talks were "non-starters."
U.S. Republican presidential candidate Mitt Romney said during a visit to Israel on Sunday that "any and all measures" must be used to keep Iran from developing a nuclear weapon.
A top aide said Romney would support an Israeli military strike if all options had been exhausted, but the candidate himself balked at repeating that position.
Panetta, who would not directly comment on remarks by Romney, said he and President Barack Obama had made clear that the United States would not "tolerate an Iran that develops a nuclear weapon."
"And that we are prepared to exercise all options to ensure that that does not happen. And I am not going to go into specific descriptions of what those options are -- except to say that we have a full range of options to deal with that potential," he said.
Iran denies Western accusations of a covert agenda to develop a nuclear weapon, insisting it wants to stockpile enriched uranium solely to generate more electricity for a rapidly growing population and radio isotopes for medical use.
Panetta's comments followed talks with leaders in Tunisia, which Washington has held up as a model for democratic change in the Middle East after a popular revolt forced autocratic leader Zine al-Abidine Ben Ali to flee the country on Jan. 14, 2011, touching off a wave of political unrest across the Arab world.
The North African country has since calmly elected its own government, defying predictions it would descend into chaos. Panetta commended Tunisia on that transition, and said he discussed ways with its leaders to bolster its counter-terrorism efforts, with an eye on al Qaeda's North Africa wing, AQIM.
"There are a number of efforts that we can assist them," he said, citing, among other things, intelligence to help them grapple with the threat. "And they expressed a willingness to work with us on that." (Editing by Diana Abdallah)