Nuclear progress as sanctions loom : Iran

Iran announced a nuclear fuel breakthrough and test-fired a new radar-evading medium-range missile in the Gulf on Sunday, moves that could further antagonize the West at a time when Tehran is trying to avert harsh new sanctions on its oil industry.

U.S. President Barack Obama signed a law on Saturday imposing tougher financial sanctions to penalize Iran for a nuclear research programme that the West suspects is aimed at developing nuclear weapons.

The move could for the first time hurt Tehran's oil exports, and the European Union is due to consider similar steps soon.

If enforced strictly, the sanctions could make it nearly impossible for most refiners to buy crude from Iran, the world's fourth biggest producer.

POSSIBLE WAIVERS

However, Obama asked for scope to apply the measures flexibly, and will have discretion to waive penalties. Senior U.S. officials said Washington was consulting foreign partners to ensure the new measures did not harm global energy markets.

Despite its missile tests, war games and threats to close the Hormuz Strait, Iran has also made conciliatory gestures, saying it wants to resume talks with major powers, stalled for a year, about its nuclear research programme.

Western officials suggest the offer may be a stalling tactic to avert sanctions and buy time for more nuclear progress.

Iranian media reported on Saturday that nuclear negotiator Saeed Jalili would write to the EU foreign policy chief to say Iran was ready for talks.

A senior Western diplomat in Tehran, who asked not to be identified, said the stepped-up Iranian threats show "that they are worried about losing petrodollars, on which more than 60 percent of the economy depends."

The rising tensions are having an impact at home. Iran's currency has nosedived in recent weeks as ordinary Iranians have moved money from savings accounts into gold or foreign currency.

The price of staple foods has increased by up to 40 percent in recent months and many critics have put the blame on increasing isolation brought about by President Mahmoud Ahmadinejad's economic and foreign policies.