The Bush administration is considering diplomatic and economic options to deter Iran from developing nuclear weapons if diplomacy at the United Nations fails, and it envisions sanctions if Tehran won't back down, U.N. Ambassador John Bolton said Thursday.

U.S. ambassador to the U.N. John Bolton, seen here in this file photo in Berlin from Jan. 13, said Thursday that it would be 'simply prudent' for the Bush administration to consider other options for dealing with Iran, in the event that diplomacy in the U.N. Security Council fails. [AP]

"It would be, I think, simply prudent to be looking at other options," Bolton said at a breakfast meeting of the State Department Correspondents Association.

He said the United States could suspend import allowances for Iranian rugs and pistachios, which were relaxed years ago in hopes of stimulating small business in Iran, and consider a crackdown on alleged financial crimes similar to U.S. pursuit of alleged fraud by North Korea. There are steps other governments could take as well, Bolton said, including financial and travel restrictions.

The United States has had no diplomatic and few economic ties with Iran since the 1979 storming of the U.S. Embassy in Tehran. Bolton dangled the possibility, however, that Iran could improve its relations with the U.S. if it ended its alleged drive for weapons of mass destruction.

"The Iranian government ... can get out of the trap they've put themselves in by reversing the strategic decision to seek nuclear weapons, and the example that's out there of what lies in store for them is the case of Libya," Bolton said.

He said Libya three years ago made a "hardhearted, national interest calculation" that it would gain more by forswearing further nuclear weapons development and thereby "opened the possibility of substantially different relations with the United States and other countries."

If Iran followed the Libya model, "we'd be prepared to consider a new relationship with them, too," Bolton said. U.S. officials said last year they planned to re-establish full diplomatic relations with Libya by the end of 2005, but the plans stalled.

Bolton's Iranian counterpart, Ambassador Javad Zarif, contended in a New York Times op-ed piece Thursday that Iran is committed to nuclear nonproliferation and eager for talks.

"Pressure and threats do not resolve problems," the Iranian diplomat wrote. "Finding solutions requires political will and a readiness to engage in serious negotiations. Iran is ready. We hope the rest of the world will join us."

The United States accuses Iran of pursuing nuclear weapons under the cover of a legitimate civilian energy program, and has long favored using the punitive deterrent powers of the Security Council to bring international pressure to bear on the clerical regime.

The Iran case is now finally before the Security Council but Bolton did not sound confident the strategy will work.

He said the "obvious difficulty" represented by the three-week delay and hefty diplomatic muscle required to win a first, mild rebuke to Iran from the Security Council last month "says something about the difficulty of the road ahead."

Iran allies Russia and China opposed a tougher stance sought by Bolton and European diplomats but eventually signed on to a written demand that Iran comply with previous U.N. nuclear watchdog requirements for its disputed nuclear program. Russian and China are also on record opposing punitive sanctions for Tehran if it does not comply, although U.S. officials say they do not rule out getting some kind of sanctions approved in the future.

Bolton laid out what he called a "calibrated, gradual and reversible approach," that ratchets up diplomatic pressure on Iran at the Security Council.

Last month's "presidential statement" gives Iran 30 days to comply with directives from the International Atomic Energy Agency. If Iran refuses, the next step would be a Security Council resolution saying the same thing, but which Bolton said would be legally binding on Iran. It would probably carry another grace period for Iran to comply, he said.

If that failed, "then we will consider the next step, which could well be a ... resolution that imposes sanctions of some kind," Bolton said.

It is unclear whether Russia and China, permanent members of the Security Council that hold veto power, would agree to either resolution.

Iran denies it is building a bomb, but insists it must retain control of sensitive aspects of nuclear development that can be used either for energy or weaponry.