By Matt Spetalnick and Dan Williams
WASHINGTON, Sept 30 (Reuters) - Israeli Prime MinisterBenjamin Netanyahu urged U.S. President Barack Obama on Mondayto step up sanctions on Iran if it pursues its nuclear driveeven as it exchanges overtures with Washington and restartsnegotiations with the West.
Seeking to reassure Israel about the emerging U.S.diplomatic engagement with Iran, Obama said Tehran must proveits sincerity with actions, insisted that Washington would notease sanctions prematurely and reaffirmed U.S. readiness toresort to military action if all else fails.
Netanyahu visited the White House three days after Obama andnew Iranian President Hassan Rouhani spoke by telephone in thehighest-level contact between the countries in more than threedecades. The call fueled hopes for a resolution of Iran'sdecade-old nuclear standoff with the West.
Signs of U.S.-Iranian rapprochement have rattled Israel,which accuses Iran of trying to buy time and get out from undertough international sanctions while it seeks to develop nuclearweapons. Iran denies it is working toward an atomic bomb.
Netanyahu, whose aides had said he would warn Obama inprivate not to trust Rouhani's charm offensive, signaledgrudging acquiescence to Obama's outreach to Iran. But heappeared to demand that Tehran offer immediate concessions bysuspending sensitive nuclear projects or else face even greaterinternational pressure.
"It is Israel's firm belief that if Iran continues toadvance its nuclear program during negotiations, the sanctionsshould be strengthened," Netanyahu told reporters a day beforehe was due to address the United Nations General Assembly in NewYork.
Netanyahu brandished a cartoon time-bomb in his U.N. speechlast year to illustrate how, according to him, time was runningout to curb Iran's nuclear arms ambitions. Israeli sourcespredict he will opt for a less flashy approach due to thedelicate nature of the diplomatic outreach with Iran but willstill stress his skepticism.
Obama said he was entering negotiations with Iran"clear-eyed" and was ready to test Rouhani's overtures. But hesaid: "Anything we do will require the highest standards ofverification in order for us to provide the sort of sanctionsrelief that I think they are looking for."
He stopped short, however, of agreeing to Netanyahu's newcall for tighter sanctions if Iran continues work on nuclearweapons. Existing international sanctions have done seriousdamage to Iran's economy, including its oil sector.
Even as Netanyahu called for a "credible military threat" topressure Iran to comply, Obama insisted: "We take no options offthe table, including military options, in terms of making surethat we do not have nuclear weapons in Iran."
Israel has threatened unilateral strikes on Iran's nuclearsites but appears unlikely to go ahead any time soon asWashington, its chief ally, tests the diplomatic waters. Israelis believed to be the Middle East's only nuclear-armed power.
Though Obama and Netanyahu have had strained relations inthe past, they showed no signs of tension in their latestencounter. They sat side-by-side in the Oval Office, eachfollowing the other's words carefully and occasionallyexchanging smiles. Including a working lunch afterwards, the twospent more than 2-1/2 hours together.
'SPOILING THE PARTY'
Before Monday's White House talks, a Netanyahu aide said hedid not care that he was perceived as "spoiling the party,"referring to the optimism stirred up in Washington over endingdecades of estrangement between the United States and Iran.
Netanyahu wants the Obama administration to demand specificsteps by Iran, including shutting down its uranium enrichmentand plutonium projects and shipping out their fissile material.
The Obama administration has been vague on what concessionsit wants from Iran. Obama did not specify what would constituteverification of Iran's actions, but he may have been referringto steps that would give the U.N. nuclear agency widerinspection powers to ensure that Iran is not hiding nuclearactivities.
Despite any differences behind closed doors, Obama andNetanyahu sought publicly to stress common ground on Iran.
The Israeli leader went out of his way to praise Obama forapplying economic and military pressure that he said had broughtIran to the table. "I appreciate deeply that you have made clearthat you remain committed to this goal (of preventing Iran fromgetting nuclear weapons)," Netanyahu said.
Netanyahu said before his visit that he was coming to debunk "sweet talk" from Rouhani, a moderate cleric who tookoffice in August and was the focus of attention at the UnitedNations last week.
Signaling Netanyahu's aim to counter Rouhani's publicrelations blitz with one of his own, aides said theU.S.-educated Israeli leader would extend his visit by a day toconduct a series of media interviews.
Though Obama has focused on Iran outreach in recent days, his attention has been divided by the looming threat of a U.S.government shutdown just after midnight on Monday if a stalematewith congressional Republicans is not resolved.
HISTORY OF STRAINED TIES
Obama and Netanyahu have a history of difficult encounters,including a blowup in the Oval Office in 2011 when Netanyahufamously lectured the president on Jewish history.
Having secured a second term, Obama visited Israel in March,where he eased the rift with Netanyahu and offered reassurancesthat he was determined to deny Iran the means to make an atomicbomb.
But different clocks tick for the two allies. While theyagree that Tehran could make its first nuclear device in monthsif it were intent on doing so, Israel warned last week this gapcould shrink to weeks due to new Iranian uranium centrifuges.
Israel would prefer that the U.S. superpower take themilitary lead against Iran if diplomacy fails. Yet Israeliswatched worriedly as Obama stumbled in his bid to musterdomestic support for attacking Syria as reprisal for Damascus'ssuspected use of chemical weapons on Aug. 21.
In the meantime, Obama's engagement with Iran could belimited by the influence of the pro-Israel lobby in Washingtonand lawmakers who share Netanyahu's suspicion of Rouhani. Theycould block any White House effort to ease major sanctions onIran and even impose new ones.
Netanyahu went to Capitol Hill late on Monday and metbriefly with small groups of lawmakers.
Further complicating matters is Obama's reinvigorated pushfor a peace deal between Israel and the Palestinians. ThoughMiddle East diplomacy was overshadowed by Iran in Monday'smeeting, Obama thanked Netanyahu for entering into "good faith"negotiations but said there was limited time to reach an accord.
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