THE WEST’s relationship with Iran deteriorated yesterday when Britain openly discussed imposing sanctions on Tehran, and the Iranian leadership threatened to cut off its co-operation with the United Nations nuclear watchdog.

A day after Europe’s three most powerful nations announced a “dead end” in two and a half years of fraught mediation, the focus turned sharply to how the international community will act if, as expected, the issue is referred to the UN Security Council.

Adding to the tension, a respected American think-tank predicted that Iran’s decision to resume uranium enrichment work this week could mean that Tehran will produce its first atomic weapon by 2009.

Jack Straw, the Foreign Secretary, said that sanctions “will be on the table” but he insisted that it was too early to discuss details. First Iran’s case must go before the 35-member board of the International Atomic Energy Agency (IAEA), the UN’s watchdog. A majority of members — at least 21 — are expected to vote for the matter to be referred to the UN’s Security Council, where punitive sanctions can be imposed.

President Bush said yesterday that a nuclear-armed Iran would be a grave threat to the world, and that Tehran’s attempts to develop such a weapon secretly were unacceptable.

Appearing at a White House press conference alongside Angela Merkel, on her first visit to Washington since becoming the German Chancellor, Mr Bush also spoke bluntly about Mahmoud Ahmadinejad, the Iranian President.

“Let me remind you of something: the current President of Iran has announced that the destruction of Israel is an important part of their agenda. A development of a nuclear weapon will take them a step closer to that objective.”

Mr Bush said he did not want to prejudge what action the UN Security Council might take against Iran, but added that referring Iran to the UN was part of a message to Tehran: “the know-how of nuclear weapons is unacceptable”.

Mr Straw said that Britain would be pressing to maintain broad international consensus on how to deal with Iran, meaning that the process may be delayed by Russia and China, countries with strong commercial ties to Iran.

The Conservatives, however, urged him to be more forceful. Michael Ancram, the former Shadow Foreign Secretary, proposed that Iran be barred from taking part in this year’s football World Cup in Germany.

“Although I have always supported a reference to the Security Council, that could rumble on for some time. An exclusion from the World Cup would give a very, very clear signal to Iran that the international community will not accept what they are doing,” Mr Ancram told the BBC.

“It may be unpleasant but you can give a very hard signal which isn’t going to hurt people as such,” he said.

Mr Straw said he favoured measures that would punish the regime rather than ordinary people in Iran. British officials said a wide range of sanctions was possible, from a ban on foreign travel by members of the regime to an embargo on certain key imports.

The Iranians showed no signs of backing down. Manouchehr Mottaki, the Iranian Foreign Minister, said yesterday that if Iran was referred to the UN Security Council it would end all voluntary co-operation with IAEA inspectors.

President Ahmadinejad insisted that Iran would not allow foreigners to block Iran acquiring science and technology.

“Iran is not frightened by threats of any country and it will continue the path of production of the nuclear energy,” he said.

Iran insists that its nuclear programme is a civilian project to make power. But experts gave warning that if it can produce enriched uranium it could be diverted to produce fissile material for a nuclear warhead.

David Albright and Corey Hinderstein, of the Institute for Science and International Security, said that operating small cascades of centrifuges, which purify uranium by spinning at supersonic speeds, would enable Tehran to mass produce nuclear fuel.

“Given another year to make enough HEU (highly enriched uranium) for a nuclear weapon and a few more months to convert the uranium into weapons components, Iran could have its first nuclear weapon in 2009,” they wrote.

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