( AP ) - A senior U.S. official challenged Iran's hard-line president Thursday over his claim that Iranians are immune from further U.N. sanctions, saying such action is in the works unless Tehran meets demands to curb its nuclear program.
Iranian President Mahmoud Ahmadinejad delivered his own warning in Tehran, saying his government would make unspecified economic retaliation against any European country that followed the U.S. lead in imposing sanctions on some Iranian banks and businesses.
A Saudi Arabian official, meanwhile, said Arab states in the Persian Gulf had proposed to Tehran that they set up a consortium to provide Iran with enriched uranium as way to defuse the nuclear fight.
U.S. Undersecretary of State Nicholas Burns made his comment after a meeting with the head of the United Nations' nuclear watchdog agency that was meant to demonstrate unity following recent strains on how best to deal with Iran's defiance.
Burns stopped to talk with Mohamed ElBaradei at the International Atomic Energy Agency's headquarters before heading to London, where he was to discuss the Iran standoff with his counterparts from Russia, China, Britain, France and Germany.
He planned to press them for agreement on a third set of U.N. sanctions to be threatened unless Tehran changes its position and obeys U.N. Security Council demands that it suspend uranium enrichment and related programs.
France and Britain back new sanctions if Tehran remains defiant, but Russia and China - the two other veto-holding permanent members of the Security Council - are skeptical.
Washington and its allies say Iran is using the program to secretly develop nuclear weapons, while the Islamic republic insists it needs enrichment technology to produce fuel for atomic reactors that will generate electricity.
Ahmadinejad has been adamant that Iran will not curtail its nuclear program and has ridiculed previous sanctions as ineffective.
On Thursday, he said Europeans would suffer if they matched the latest U.S. sanctions that bar American companies from dealing with businesses and banks linked to Iran's Revolutionary Guards, a military force that has holdings in oil, construction and other sectors.
"If they plan to cooperate with the enemy of the Iranian nation, we cannot interpret this as a friendly behavior. We will show reaction," Iranian state radio quoted Ahmadinejad as saying. "You, Europeans, know well what will happen in the economic sphere if Iran takes a serious move in this matter."
According to Iranian statistics, Europe is Iran's largest trading partner.
ElBaradei angered Washington by suggesting it was too late to insist on a full Iranian enrichment freeze and then reaching an agreement with Tehran that commits Iran to answer questions it has been dodging about its nuclear program.
While Washington has since swung its support behind that approach, U.S. officials worry Iran will use the deal to try to weaken Security Council attempts to force an enrichment halt. Ahmadinejad and other Iranian officials have said that if Iran meets its commitment to tell all to the IAEA, the matter before the Security Council will be "closed."
Burns took pains to rebut that view after his hour-long meeting with ElBaradei.
Ahmadinejad "said in September the Security Council case is closed," Burns told reporters. "I am sorry to tell him it's not closed. There are sanctions being implemented ... and there will be a third Security Council sanctions resolution" if Iran continues to defy the council.
Burns said he and ElBaradei agreed that "it's important that Iran finally tell the truth about its activities in the past ... but we also agreed that all of us" back a third round of sanctions if necessary.
Saudi Arabia's foreign minister, Prince Saud al-Faisal, suggested a way out of the crisis is a proposal by the Arab nations around the Persian Gulf to form a consortium that would build a uranium enrichment plant to supply the region's states, including Iran, with reactor fuel.
Speaking with the Middle East Economic Digest in London, he said the plant should be sited in a neutral country outside the region.
"The U.S. is not involved, but I don't think it (would be) hostile to this, and it would resolve a main area of tension between the West and Iran," the magazine quoted Prince Saud as saying.
He said the idea had been proposed to Iran's government, which said it would consider the plan. The Iranians previously ignored a similar proposal from Russia - to host Iran's uranium enrichment facilities on its territory to allay Western concerns about monitoring.
The agreement between the IAEA and Iran commits Tehran to clear up by December all questions about its program - much of which the Iranians had kept secret until discovered four years ago.
In Tehran, Iranian officials and IAEA representatives wrapped up four days of talks on some of those questions Thursday, state media reported. The Iranian side expressed satisfaction with the discussions, but there was no comment from the U.N. agency.