Britain said Iran would face new UN sanctions unless it gives a response by Tuesday to the offer, a British Foreign Office spokesman said.

"We will be disappointed if there (is) no response to the E3 proposals by tomorrow," the spokesman said, referring to proposals formally put to Tehran by Britain, France and Germany.

"We will have no choice but to ask the UN to proceed with further sanctions."

The French foreign ministry echoed that stance, saying the Islamic republic "will have to face new sanctions" if it does not respond positively by Tuesday to the international community's sanctions freeze-for-enrichment freeze offer.

Paris "expressed its disappointment at the lack of a clear response from Iran" to the proposals, the ministry said in a statement.

InNew York France's deputy UN ambassador Jean-Pierre Lacroix told AFP: "If we don't get an encouraging response from the Iranians, we will have to show firmness, resort to sanctions as in the past."

EU foreign policy chief Javier Solana earlier Monday held what a spokesman described as "inconclusive" talks with Iran's top nuclear negotiator, Saeed Jalili, after Tehran missed a deadline set by Washington to respond to the proposed trade and economic incentives.

US State Department spokesman Gonzago Gallegos said Jalili told Solana that Tehran would provide a written response on Tuesday.

Senior diplomats from the United States, Britain, France, Germany, Russia and China discussed the latest developments by telephone Monday and agreed to push for new action against Iran if it continued holding out.

"We agreed that in the absence of a positive response, we have no choice but to pursue further measures," Gallegos said.

"We are disappointed that we have not yet received a response from Iran as requested in Geneva on July 19," he said, referring to when the incentive offer was made.

Tehran has steadfastly refused to suspend its uranium enrichment activities, which it says are aimed only at producing fuel for nuclear power production.

The United States and its allies fear the program is a cover for developing nuclear weapons.

The United Nations has imposed three sets of sanctions against Iran over the dispute and is mulling a fourth round of measures.

Iranian state-run television meanwhile reported that in the Solana-Jalili telephone conversation, "both sides agreed to continue talks," and Solana's spokesman said that further contacts between the EU and Iran "are not ruled out in the coming days."

"They also emphasized that preserving this path (talks) needs a positive and constructive atmosphere," the Iran television report said without elaborating.

Solana presented an offer of economic and trade incentives in mid-June, while Iran has put forward its own proposal, an all-embracing package of suggestions to resolve the problems of the world, including the nuclear issue.

Washington had demanded that Iran respond by last weekend to the proposal, while Iran dismissed the deadline as "media speculation."

Amid the continued tensions, Iran announced on Monday that it had successfully test-fired an anti-ship missile with a range of 300 kilometers (180 miles) that it had developed with homegrown technology.

"No enemy vessels would be able to escape it within a 300-kilometer radius from the borders of Iran," said the commander of the elite Revolutionary Guards, General Mohammad Ali Jafari.

Iran has in recent months frequently boasted of developing new weapons and military hardware but the claims have often met with skepticism from Western defense analysts.

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Walker's World: Which Iran is in charge?
Will the real Iranian government please stand up to be identified? Tehran has just ignored the latest deadline from the United States and the Europeans to suspend its nuclear enrichment process, and Iranian President Mahmoud Ahmadinejad declared over the weekend that Iran will not change its nuclear policies "by one iota."

That stands in sharp contrast to Ahmadinejad's emollient words in last week's interview with NBC-TV, in which he spoke of "common ground" and hailed the July 19 opening of direct talks with the United States. His remarks excited some optimism in Europe and much confusion in Washington.

There are various explanations for what sounded like a new approach from Iran. The first is the growing evidence of serious tensions between Ahmadinejad and other centers of Tehran power, including the cautious conservatives around Supreme Leader Ayatollah Ali Khamenei and the more pragmatic types around former President Rafsanjani, who, as chairman of the Assembly of Experts, will be the key figure in picking the next Supreme Ayatollah. Given Iran's roaring rate of inflation and pitiful economy despite the oil price bonanza, it may be that Ahmadinejad is feeling weakened and wants to sound more accommodating.

The second explanation is that Ahmadinejad and even his hard-line allies in the Republican Guard are nervous about military strikes from Israel and/or the last flailings of a Bush administration, and of the growing U.S.-European consensus on toughening sanctions. The third explanation is that the Iranian nuclear weapons project is now sufficiently well-advanced that it is unstoppable, even if the current research centers and centrifuges were bombed to bits.

The fourth explanation is that the final details of the contract between Iran's Pars Oil and Gas Co. and China's CNOOC (China National Offshore Oil Corp.) to exploit the North Pars field have just been completed, according to Ali Vakli, managing director of Pars Oil and Gas Co. He added that Iranian and Chinese companies are expecting to start selling its gas in Asian and European markets "very soon." The deal is worth from $70 billion to $100 billion over the next 25 years.

For the past three years China has been Iran's top oil export market. Iran exports close to 500,000 barrels of oil a day to China, which makes it Beijing's third-largest oil supplier, behind only Angola and Saudi Arabia. And as Western companies scale back their operations in Iran, fearing sanctions, China scrambles to replace them. Over 100 state-backed Chinese companies are now building dams, shipyards and airports, developing mines and infrastructure for oil and gas. Indian companies, in the wake of the latest agreement on an Iranian gas pipeline through Pakistan to India, are increasingly active in Iran.

Moreover, it was only last month that Iran signed a deal with Russia's Gazprom to include it in the development of Iran's South Pars field, the world's largest, containing around 7 percent of known world gas reserves. To put it in perspective, the world's biggest oil field, Saudi Arabia's Ghawar, contained 80 billion tons of oil equivalent. The North Field of South Pars is three times larger, containing 233 billion tons of oil equivalent.

So Iran is probably feeling quite confident that neither Russia nor China is likely to cast its vote in the U.N. Security Council for any seriously aggressive international action against Iran.

The final explanation is that Ahmadinejad genuinely believes that history is on his side. As he told his week's ministerial meeting of 120 nations in the Non-Aligned Movement in Tehran, "The major powers are on a descending course. The extent of their influence drops day by day. They are approaching the end of their era."

He is probably wrong. The American hyper-power may be going through a rough patch, but China and Russia and, in its own confused and bumbling way, the European Union, are all behaving as though they are great powers with leading roles to play in global affairs. Indeed, most of Ahmadinejad's neighbors see Iran as the local great power (even before it has tested a nuke) and are less than comfortable with the degree of regional influence that this includes. The one strategic goal that Ahmadinejad indisputably shares with Khamenei and Rafsanjani is a conviction that Iran is going to be one of the major powers of the 21st century, just as ancient Persia was a great power from antiquity until the 18th century.

But the confusion and questions about Iran's nuclear intentions are paralleled with the equal confusion about the United States' policy toward Iran. In recent days, there have been two striking developments. The first came from U.S. Defense Secretary Robert Gates, who noted that even while he believes Iran is "hell bent" on building nuclear weapons, a third U.S.-led war in the region would be "disastrous on a number of levels."

Writing in the latest issue of the U.S. Army War College journal Parameters, Gates began with the old saying "Never fight unless you have to." The thrust of his article was that while he believes Iran is trying to develop nuclear weapons, supports terrorism and is a destabilizing influence throughout the region, "another war in the Middle East is the last thing we need."

Then last Monday, speaking before the Pacific Council, retired Gen. John Abizaid, who ran U.S. Central Command (including Iraq and Afghanistan) from 2003 to 2007, warned an attack on Iran would be a bad idea "at this particular time .. (with) our ground forces tapped out." Even more striking, he suggested a nuclear-armed Iran, which in the long run may not be preventable, need not be a disaster.

"I don't believe Iran is a suicide state," he said, suggesting the United States should talk to Iran just as it talked with its Cold War enemies. "Deterrence will work with Iran. It is a country of many different power centers that are competing. Despite what their crazy president says, I doubt seriously whether the Iranians are interested in starting a nuclear war. We need to make it very clear to the Iranians, the same way we made it clear to the Soviet Union and China, that their first use of nuclear weapons would result in the devastation of their nation," he added.

The point is that Tehran is probably just as confused about U.S. intentions as Washington is by the various signals coming from Tehran. But a process of negotiation seems to have begun, even in this twilight of the Bush administration. And it comes with the intriguing prospect of continuity, if Sen. Barack Obama's hints about keeping Gates on as defense secretary in a Democratic administration are meaningful.

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