Washington said world powers are poised to begin discussing punitive measures next week against Iran if, as expected, the International Atomic Energy Agency finds Tehran ignored a U.N. Security Council demand to stop enriching uranium by August 31.

As time was running out, Iran vowed never to drop the project and launched one of its key elements, a heavy-water plant. Tehran is also pressing ahead with enriching uranium in small amounts at its pilot centrifuge site, diplomats said.

But Iran's August 22 reply to the powers' offer of incentives not to enrich, saying it could negotiate the scope of its plans, has spurred some U.S. allies in Europe to ask for exploratory talks with Tehran, two Western diplomats said.

"This is to gain more time and postpone the expected sanctions," one said, reflecting underlying European Union preference to find a compromise with Iran rather than isolate one of Europe's biggest oil suppliers.

In a possible nod to EU concerns, U.S. State Department spokesman Sean McCormack said that even if sanctions discussions began, Iran could still opt to halt enrichment work and spur broader negotiations to implement the trade sweeteners package.

EU foreign policy chief Javier Solana's spokeswoman said he might speak by telephone with Iranian chief negotiator Ali Larijani before the deadline passed, and they could meet afterward, to try to clarify Tehran's response.

The Security Council asked Mohamed ElBaradei, head of the nuclear watchdog IAEA, to spell out on August 31 if Iran had complied with the deadline set in a July 31 resolution.

Washington, Iran's arch-foe, felt the 30-day grace period given to Iran was a fair chance for it to change its mind and if it did not, veto-holding Russia and China could be won over to backing Council sanctions once the deadline expired.

RUSSIA, CHINA STILL OPPOSE SANCTIONS

But Moscow and Beijing, keen to protect heavy energy contracts with Tehran and seeing no imminent threat from its nuclear program, urged a return to diplomacy after Iran's careful response to the incentives package.

Even Washington's staunchest ally Britain has played down U.S. predictions of a swift resort to sanctions in September.

Although Iran must obey the legally-binding Council resolution, "we don't close the door to further talks" after the deadline, a British Foreign Office spokesman said on Wednesday.

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