Dick Cheney, the US vice-president, has not ruled out military action against Iran, despite saying that diplomacy was favoured to resolve Tehran's nuclear programme.
"It would be a serious mistake if a nation like Iran were to become a nuclear power," Cheney said during a joint press conference with John Howard, the Australian prime minister.
Cheney said: "All options are still on the table."
His comments came after the International Atomic Energy Agency (IAEA) issued a report saying that Iran had not halted, and in fact had expanded, its uranium enrichment programme, defying a UN Security Council demand to stop by this week.
The United States, France and Britain have called for tougher UN Security Council sanctions on Tehran over its nuclear programme which they fear could be used to develop nuclear weapons.
Iran insists that its enrichment activities, which could make fuel for power plants or material for warheads, are for peaceful purposes.
"We've worked with the European Community and through the United Nations to put in place a set of policies to persuade the Iranians to give up their aspirations," said Cheney. "That's still our preference."
"The next step now is being debated, between our government and the others involved," he added.
Cheney also told reporters that he was concerned about Iran's "fairly aggressive" role in the Middle East.
Nicholas Burns, the US undersecretary of state, will meet senior European diplomats in London on Saturday to decide "the future course of action we want to pursue with respect to the United Nations sanctions and so forth," he said.
Officials from the five permanent Security Council nations and Germany will then meet on Monday to start work on a new resolution to try to pressure Iran to suspend enrichment.
On Friday, Mahmoud Ahmadinejad, the Iranian president, said Tehran should stand up to the world and continue to work on its nuclear programme.
"If we show weakness in front of the enemy, the expectations will increase. But if we stand against them, because of this resistance they will retreat," Ahmadinejad said in a speech in northern Iran, the country's ISNA news agency reported.
At the United Nations, Mehdi Danesh Yazdi, Iran's deputy ambassador, accused the United States, Britain and Israel of levelling "baseless allegations" about its nuclear ambitions and insisted that Tehran had always considered weapons of mass destruction "inhumane, immoral and illegal".
He told the Security Council that his country had an "inalienable right" to develop nuclear technology for peaceful purposes and would not "give in to the pressures emanating from groundless and unsubstantiated allegations and ulterior political motives".
Agencies
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