By Parisa Hafezi
TEHRAN (Reuters) - Iran on Wednesday dismissed a draft U.N. resolution to expand sanctions as lacking legitimacy, but U.S. President Barack Obama insisted Washington would press ahead and that Tehran could not be trusted.
The draft resolution, agreed to by all five permanent Security Council members after months of negotiation, targets Iranian banks and calls for inspection of vessels suspected of carrying cargo related to Iran's nuclear or missile programs.
But the proposed sanctions are far more modest than the crippling measures Obama's administration originally pushed for, largely as a result of objections by China and Russia, which have close trading ties with Tehran.
"The draft being discussed at the United Nations Security Council has no legitimacy at all," Iran's semi-official Fars news agency quoted President Mahmoud Ahmadinejad's senior adviser Mojtaba Samareh-Hashemi as saying.
Western diplomats said the text resulted from a compromise between the United States and its three European allies, which had pushed for much tougher sanctions against Tehran, and Russia and China, which sought to dilute them.
Few of the proposed measures are new. But Western diplomats said the end result was probably the best they could have hoped for, given China's and Russia's determination to avoid measures that might have undermined Iran's troubled economy.
Despite that, Obama hailed the draft plan and again called on Iran to curb its nuclear ambitions.
"Given Mexico's seat on the U.N. Security Council, we agreed on the need for Iran to uphold its international obligations or face increased sanctions and pressure," he told reporters after talks with Mexican President Felipe Calderon.
Obama later told Turkish Prime Minister Tayyip Erdogan by telephone that fundamental concerns remained over Iran's nuclear program and "negotiations on a new U.N. Security Council resolution will continue," the White House said.
While acknowledging a nuclear fuel swap deal Turkey and Brazil brokered with Iran on Monday, Obama said Tehran had yet to notify the U.N. nuclear watchdog of its intentions and the Islamic Republic's recent actions "do not build confidence."
Iranian politicians sought to reassure Iranians that any new sanctions would have no more impact than existing measures, which had failed to cripple the economy.
"Despite all the restrictions that the arrogant countries impose on Iran in the global arena, the Islamic Republic has significant successes in political and economic fields," Energy Minister Majid Namjou was quoted as saying by ILNA news agency.
'NO CHANCE'
Foreign Minister Manouchehr Mottaki said there was "no chance for a new resolution" to be approved at the Security Council. "Let's not take this seriously," he told reporters at a meeting in Tajikistan.
Iran rejects Western allegations its nuclear program is aimed at developing weapons. It says its atomic ambitions are limited to the peaceful generation of electricity and refuses to suspend uranium enrichment.
"A fourth round of sanctions is unlikely to change the Iranian attitude towards its nuclear program. Developing its nuclear program is a strategic decision and currently priority for the regime in Tehran," said Nicole Stracke, an Iran expert at Gulf Research Centre in Dubai.
"Therefore, the Iranian regime will divert the resources necessary to further the progress of its nuclear program."
The decision to circulate the resolution to the Security Council on Tuesday was a rebuff to a deal brokered by Brazil and Turkey in which Iran agreed to send some enriched uranium abroad in return for fuel rods for a medical research reactor.
Iran and the two countries that brokered the swap deal urged a halt to talk of further sanctions. But the United States and its European allies regard the deal as a manoeuvre by Iran to delay their efforts to increase pressure on Tehran.
U.S. Ambassador Susan Rice said the fuel deal had "nothing to do" with the uranium enrichment that led to the first three rounds of sanctions on Iran and the latest draft resolution.
Erdogan, speaking by phone with Russian Prime Minister Valdimir Putin, said the Iran nuclear standoff must be solved through dialogue and diplomacy, Erdogan's office said. Putin said Turkey's and Brazil's efforts opened "additional possibilities," the statement said.
Western powers say that in addition to refusing to suspend enrichment, Iran has not opened up completely to International Atomic Energy Agency inspections.
French Foreign Ministry spokesman Bruno Valero said the swap deal "will be considered once detailed and written proposals by Iran are submitted to the IAEA."
The draft resolution "calls upon states to take appropriate measures that prohibit" the opening of new Iranian bank branches or offices abroad if there is reason to suspect they might be aiding Iran's nuclear or missile programs.
It also calls on states "to exercise vigilance over transactions involving Iranian banks, including the Central Bank of Iran" to ensure those transactions do not aid Tehran's nuclear and missile programs.
It urges countries to be wary of dealing with Iran's Islamic Revolutionary Guard Corps and says some members and companies it controls will be added to existing lists of individuals and firms facing asset freezes and travel bans.
The draft calls for an expansion of an existing arms embargo to include more types of heavy weapons.
The draft will likely be revised in the coming weeks.
Aside from Turkey and Brazil, council member Lebanon has made clear it would have trouble supporting sanctions against Iran. Lebanon, diplomats say, will likely abstain from a vote on the resolution because the Iranian-backed militant group Hezbollah is in its government.
(Additional reporting by Matt Spetalnick in Washington, Olzhas Auyezov in Dushanbe, Guy Faulconbridge in Moscow, Robin Pomeroy in Tehran, Fredrik Dahl in Dubai and John Irish in Paris; Writing by Dominic Evans; Editing by Samia Nakhoul and Peter Cooney)
(London World Desk, +44 207 542 7919)
