Europe and Japan moved ahead Tuesday in planning for punitive cuts in oil imports from Iran, where a senior official dismissed Western anger at news Tehran is enriching uranium deep underground as cover for ulterior motives.
A day after Iran confirmed the start of enrichment at a mountain bunker near the holy city of Qom - and sentenced an American to death for spying - the European Union brought forward a ministerial meeting that is likely to match new U.S. measures to hamper Iran's oil exports.
Russia expressed regret and concern at news that Iran had begun enrichment operations at the Fordow bunker and criticised Tehran for ignoring the international community's demands for a response to its concerns.
An official at the IAEA, the UN nuclear watchdog, said inspectors were expected to visit Iran soon to discuss their worries about possible military aspects to its nuclear program.
Japan took precautions in case it joins an international embargo on buying Iranian crude by asking Saudi Arabia and the United Arab Emirates to help it make up any shortfall.
Anxiety about the Iranian nuclear program helped push up oil prices, and Brent February crude rose 92 cents to $113.37 a barrel by 12:48 p.m. EST (5:48 p.m. British time).
Iran's envoy to the International Atomic Energy Agency was scathing about reactions to Monday's news, confirmed by the IAEA, that the Fordow site was enriching uranium - something Western powers say is aimed at developing nuclear arms, rather than the civilian uses that Iran asserts.
Noting that Fordow had been monitored by the IAEA for two years, Ali Asghar Soltanieh told Iran's ISNA news agency that Western reaction had political purposes. The clerical leadership in Tehran, under pressure from sanctions that are disrupting the economy ahead of a parliamentary election, often accuses Western powers of seeking to overthrow it.
In Brussels, the European Union said it brought forward by a week, to January 23, a meeting at which foreign ministers from the bloc, which rivals China as Iran's biggest customer for crude, are expected to confirm an embargo on oil purchases.
The 27 EU governments are still debating how quickly some of their ailing and oil-dependent economies can afford to drop a key supplier and find alternatives.
The change is officially to avoid a clash with an EU summit on January 30, but bringing the ministers' meeting forward could speed a decision on when to impose the ban, following U.S. President Barack Obama's New Year's Eve move to stop payments to Iran for oil.
The Islamic Republic's decision to carry out enrichment work deep underground at Fordow could make it much harder for U.S. or Israeli forces to carry out veiled threats to use force against Iranian nuclear facilities. That in turn could narrow a time window for diplomacy to avert any attack.
The U.S. State Department Monday called uranium enrichment at Fordow a further escalation of Iran's ongoing violations of U.N. resolutions.
France called for measures of unprecedented scale and severity against Tehran. Germany and Britain also condemned it. Others, including Greece and Italy, which are bigger customers for Iranian oil, are seeking delays before cutting off imports.
The death sentence Monday for Amir Mirza Hekmati, 28, an Arizona-born former U.S. military translator with dual Iranian-U.S. nationality, further riled Washington, which denies he is a spy and has demanded his immediate release since his arrest.
The two moves come at a time when new U.S. sanctions imposed over Iran's nuclear program are causing real economic pain.
The rial has lost 20 percent of its value against the dollar in the past week alone, raising the cost of living for Iran's 74 million people. As they scrambled to buy dollars to protect savings, some said mobile phone text messages were being blocked where they included discussion of dollars or currency. Officials denied any state censorship.
Tehran has responded to the sanctions moves with threats to international shipping that have frightened oil markets. A parliamentary election in two months is widening Iran's internal political divisions, though the widely diverse opposition to the clerical leadership is also divided, both in Iran and in exile.
Presidents Mahmoud Ahmadinejad of Iran and Hugo Chavez of Venezuela mocked U.S. disapproval and joked about having an atom bomb.
Despite those arrogant people who do not wish us to be together, we will unite forever, the Iranian leader told Chavez during a visit to Caracas.
On New Year's Eve, U.S. President Barack Obama signed into law by far the toughest financial sanctions yet against Iran, which if fully implemented could make it impossible for most countries to pay for Iranian oil.
Nuclear talks between Iran and the five permanent U.N. Security Council members plus Germany collapsed a year ago. Efforts to restart them have foundered over Iran's refusal to negotiate over its right to enrich uranium.
The United States and Israel say they are leaving the military option on the table in case it becomes the only way to prevent Iran from making a nuclear weapon.
Hekmati's family says he was arrested last August while visiting grandparents in Iran. The United States urged Iran to release him without delay. His execution could still be blocked by Iran's highest court, which must confirm all death sentences.
Iran disclosed to the IAEA in 2009 that it was building the facility beneath a mountain at Fordow - but only after learning that it had been detected by Western intelligence.
After years in which economic sanctions had little effect, the latest measures against Tehran are causing real pain.
Iran has remained defiant. In a televised speech Monday, Supreme Leader Ayatollah Ali Khamenei said: Sanctions imposed on Iran by our enemies will not have any impact on our nation. The Iranian nation believes in its rulers.
(Editing by Alastair Macdonald)