Six world powers meeting in Paris on Tuesday said they had failed to agree what sanctions to impose over Iran's refusal to halt sensitive nuclear work, as diplomats said that Russia was blocking a deal.
Top diplomats from the five veto-wielding UN Security Council members -- Britain, China, France, Russia and the US -- plus Germany and a EU envoy, took part in the talks.
With agreement still proving elusive, Britain and Germany felt the time had come to move their negotiations back to the UN in New York in a last push to broker a deal.
"We made substantive progress on the scope of the sanctions, targeting proliferation-sensitive activities. There remain several outstanding issues, on which we will reflect over the coming days," France's foreign ministry said in a statement.
In the talks, France, Germany and Britain told Russia they want a UN resolution on sanctions to be passed by the end of the year, an EU diplomat said.
After forcing the Europeans to water down their sanctions plans over the past weeks and spurning tough measures against Iran, the Russians indicated a compromise might be possible, prompting Tuesday's hastily arranged talks.
Yet the Europeans, the US, Russia and China remained divided over the proposed bans on exports of sensitive materials, an assets freeze and travel ban on individuals and groups involved in Iran's nuclear program.
The Russians agreed to export bans on more technology and materials that could be used in Iran's nuclear or ballistic missile programs, but little progress was made on financial sanctions against people and organizations linked to sensitive work, or on visa bans, the European diplomat said.
The sanctions would be a first phase of punishment against Iran for its failure to comply with an Aug. 31 UN deadline to suspend uranium enrichment, which can produce fuel for nuclear power plants or bombs.
Iran denies Western charges that its nuclear program is a cover for an atomic weapons program but was ordered by the Security Council to freeze enrichment for failing to convince the world that its nuclear programme is entirely peaceful.
Despite the failure to reach agreement after its foreign minister said he thought a breakthrough was possible, France also sought to remain upbeat.
"We all agree on the necessity of adopting an effective resolution. We are now close to a conclusion of this process. The next step will be in New York," the foreign ministry said.
The European diplomat, who spoke on condition of anonymity, said the Europeans had told the Russians they wanted a resolution passed by the end of the year or else they would lose credibility.
"We had hoped that this discussion would enable us to move forward rather substantially and to be honest that was not the case," he said.
"We have indicated to them that for the credibility of our action, and for the credibility of the [Security] Council's action, we now need a decision by the end of the year," he said.
EU diplomats say that the sanctions which are called for in the text will be largely symbolic but that unanimous approval of even mild sanctions will nevertheless send a strong signal to Tehran that the world is determined to stop Iran obtaining nuclear arms.
In Washington, Robert Gates, who has been nominated to replace Donald Rumsfeld as US defense secretary, said military action against Iran would be "an absolute last resort."
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