Larijani provided no other details of a written response given Tuesday to an incentives package offered by the United States and five other powers to entice Iran to give up uranium enrichment and other suspect nuclear activities.

Even before the full content of the Iranian response was known, senior US officials were reaffirming their position that only a total cessation of Iran's uranium enrichment by a UN Security Council deadline of August 31 would avert sanctions.

"We will obviously study the Iranian response carefully, but we are also prepared, if it does not meet the terms set, to proceed here in the Security Council ... with economic sanctions," said the US embassador to the United Nations, John Bolton.

"I think we will be prepared to submit elements of a resolution in the council very quickly," he said.

Most observers had expected Iran on Tuesday to avoid a direct rejection of the enrichment suspension demand while at the same time refusing to give in to the UN requirement it abandon the program as a precondition for further talks.

"The Iranians will likely agree to negotiations that may lead to at least a temporary suspension, but not agree to this as a precondition," said Trita Parsi, a writer who has had extensive contacts with the Iranian leadership.

"As disappointing as this response may be for Washington, it should not be seen as the end of the negotiating track," said Parsi, author of the forthcoming book "Treacherous Triangle -- The Secret Dealings of Iran, Israel and the United States".

Iran's conditional response to the UN ultimatum is expected to prompt renewed debate in the US administration between those seeking dialogue with Iran, as promoted in the past by some in the State Department, and hardliners identified with Vice President Dick Cheney.

Parsi and other experts warned that a win by proponents of immediate sanctions carried grave risks.

"Doing so would put the US on the slippery slope towards military action, because none of America's allies believe that UN sanctions will be effective," said Parsi.

James Marsh, director of the Security Studies program at the Massachusetts Institute of Technology, agreed and said a US rush to impose sanctions could also split the fragile alliance built up over the issue among the permanent UN Security Council members -- Britain, China, France, Russia and the United States.

"You can tell by Iran's comments in advance of this response that they are seeking to divide the Europeans and the Americans," Marsh said.

"Any appearance on the part of Iran that it is willing to be serious about negotiations will give the Chinese, the Russians and to some extent the Europeans reason to want to avoid escalating the political crisis, and that means at this point voting for sanctions," he said.

US officials have been reluctant to spell out exactly what sanctions Washington will seek at the UN if Iran fails to meet the August 31 deadline.

A senior State Department official would only say it would be a "multi-stage process" beginning with "targetted sanctions".

These are expected to include relatively minor actions like bans on travel by Iranian nuclear or other officials and restrictions on government contracts with Iranian enterprises.

But the UN has the authority to impose more wide-ranging trade sanctions that could have a significant impact on the Iranian economy.

Fuller sanctions will also impact on European and other economies which have extensive trade relations with Iran, either as exporters to the Islamic republic or importers of its oil.

"The Iranians have been preparing themselves for sanctions, calculating that they won't be very harsh and they will be just as costly, if not more costly, to the Europeans," Parsi said.

"Sooner or later the Europeans will break ranks," he said.

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