* Western powers: IAEA report on Iran justifies sanctions
* Western powers want to sanction Iran's energy sector
* Russia and China have resisted new Iran sanctions
UNITED NATIONS, Aug 28 (Reuters) - The U.N. nuclear watchdog's new report on Iran sets the stage for a showdown between Western powers who want to hit Iran's energy sector with sanctions and Tehran's protectors -- Russia and China.
The report by the Vienna-based U.N. International Atomic Energy Agency said that Tehran had failed to heed U.N. Security Council demands that it stop enriching uranium and cooperate with the agency's investigation "to exclude the possibility of military dimensions to Iran's nuclear program." [ID:nLS247273]
The United States, Germany, France and Britain have threatened Iran with a fourth round of U.N. sanctions if it continues enriching uranium and refuses to clear up concerns that it has conducted extensive research into how to build a nuclear weapon.
Moscow and Beijing reluctantly backed three rounds of sanctions against Iran's nuclear and missile industries, though they worked hard to water down the measures before agreeing to vote for them in the U.N. Security Council.
Russia and China, like the United States, Britain and France, are veto-wielding permanent council members and can strike down any resolution that reaches the 15-nation panel.
The United States and Germany have said any new sanctions should hit Iran's energy sector. Moscow and Beijing, which have strong trade ties to Iran, have so far rejected the idea.
George Perkovich, an analyst at the Carnegie Endowment for International Peace in Washington, said the latest IAEA report ought to make it more difficult for Russia and China to continue blocking efforts to impose tougher U.N. sanctions.
The IAEA report "tells the Russians and Chinese that the Iranians have been thumbing their nose at ... the IAEA and the Security Council," he said.
"It should convince Russia and China to support more sanctions, but whether it will, I don't know," he said. "Probably not."
Several Western diplomats said privately that they were afraid Perkovich was right, though they said their countries would try hard to convince Moscow and Beijing to come along.
"We've done it three times already," one diplomat said.
The United States, France and Britain made clear that they believed the IAEA report provided a sound legal basis for new sanctions. Russia and China have yet to react.
French Foreign Minister Bernard Kouchner was more optimistic than Perkovich and pointed to what he said was a shift in Russia's position on Iran.
"Obviously, to get international sanctions, the positions of Russia ... and China have to change," he said in Paris.
"We're going to try to convince them. I see Russia's position on this dossier changing," he told reporters. "I think the sanctions will be accepted."
As Western powers focus on the negative aspects of the IAEA report, some diplomats said Russia and China might point to new Iranian gestures of cooperation with IAEA inspectors.
The agency said Iran had agreed to let the IAEA expand its monitoring at Iran's enrichment plant at Natanz. But Mark Fitzpatrick of the London-based International Institute for Strategic Studies did not see that as a significant step.
"While acknowledging Iran's last-minute cooperation in allowing the IAEA to better verify current nuclear activities, the report underscores that Iran continues to stonewall on answering the series of critical questions about suspicious past activities," Fitzpatrick said.
The IAEA report will be a key topic of discussion at a Sept. 2 meeting of senior officials from the United States, Britain, France, Germany, Russia and China on Iran. Foreign ministers from the six will discuss the issue later next month on the sidelines of the U.N. General Assembly in New York. (Additional reporting by Arshad Mohammed in Washington, James Mackenzie in Paris and Sylvia Westall in Vienna; editing by David Storey)
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