MOSCOW—Sanctions aimed at punishing Iran will begin in two weeks after another round of talks with world powers ended without an agreement by Tehran to curb its nuclear program.
The lead negotiators for both sides said the ball was in the other's court after the end of talks here. Catherine Ashton, the European Union's foreign policy chief, and Saeed Jalili, the lead Iranian negotiator, used similar words, saying that the other had "a choice" to make to get negotiations restarted.
Iran had hoped the talks might forestall the looming sanctions. With new penalties now a certainty, the long-running international dispute has entered an unpredictable new phase that will test past Iranian threats to retaliate, including a vow to choke off a key global oil channel, the Strait of Hormuz.
In the absence of talks, sanctions also may be the last barrier to a possible Israeli strike on Iran's nuclear facilities, a step U.S. officials fear could spark a wider conflict.
Associated Press
Iran's Jalili, center, said the talks were 'a test on whether the West is for or against Iran's scientific progress.'
Iran's economy already is suffering shocks because of a combination of government mismanagement and sanctions that have driven up the cost of staple goods by as much as 50%.
Upcoming penalties will up the ante by targeting Iranian oil exports, its main source of revenue. A European Union embargo on all Iranian oil sales takes effect July 1, a move that could endanger as much as a third of Iran's revenue.
Before that, the White House will impose sanctions on firms doing business with Iran's central bank beginning June 28, another tool to drain Tehran of its oil revenue.
The U.S. Congress is likewise poised to push for more sanctions after the failure of talks in the past two months in Istanbul, Baghdad and now Moscow.
U.S. officials underscored their determination to enforce sanctions with a warning to Venezuela on Tuesday over a plan to cooperate with Iran to develop surveillance drones.
"All countries, including Venezuela, have an obligation to comply with international sanctions against Iran," said State Department spokeswoman Victoria Nuland. "We're committed to ensuring that if we see violations of Iran sanctions, that we will call them out and that we will seek appropriate action."
Iran and the world powers agreed to extend the negotiations by planning some lower-level technical meetings on July 3 in Istanbul.
No higher-level meetings are yet scheduled.
Compounding the setback, Iran recently backed out of a tentative deal with the United Nations' nuclear watchdog to provide its inspectors with greater access to scientists, sites and documents believed to be tied to Tehran's nuclear work.
Underscoring the rising stakes, the U.S. House Armed Services Committee will hold a hearing Wednesday on military options for addressing Iran's nuclear program.
Under the new U.S. sanctions, any foreign state bank processing oil transactions through Iran's central bank, called Bank Markazi, could be punished. Non-state institutions doing business with Bank Markazi could also be hit.
The State Department has granted waivers in recent months from these sanctions to countries that have shown a willingness to reduce their Iran oil purchases.
But China and Singapore could still be targeted after June 28, U.S. officials said.
Additional U.S. sanctions could further target Iranian energy and financial sectors as well as its shipping and insurance businesses, said Sen. Mark Kirk (R., Ill.), who has advanced new sanctions legislation.
"After three rounds of meetings, Iran remains in violation of multiple U.N. Security Council resolutions ordering it to halt all its uranium enrichment activities," Mr. Kirk said.
Diplomats called the two days of talks in Moscow "intense and tough" but said that the two sides remained far apart on how to unwind Iran's uranium enrichment program, which Tehran again Tuesday called an "inalienable right" of the Iranian people.
Western officials had expressed hope that the talks Monday and Tuesday would bear fruit, in part because heightened pressure from the Kremlin, which has traditionally maintained a closer relationship with Iran than most of the other Security Council members that are pressuring Tehran to scale back its nuclear program.
Russian officials dined with the Iranian delegation, and met with members in an effort to push along negotiations.
But U.S. and European officials said the talks remained deadlocked over Iran's program.
As in previous talks in Baghdad last month and in Istanbul before that, Iran demanded a lifting of sanctions before it would back off on its enrichment of uranium to 20% purity, which Western officials call perilously close to weapons grade.
But world powers have insisted that Iran take the first conciliatory step and have been proposing a step-by-step program in which Iran will be rewarded for putting a halt to its high-grade nuclear enrichment, ship out the highly-enriched fuel that it has amassed, and shut down a nuclear facility situated deep in a mountain that is impervious to an airstrike.
Ms. Ashton, the lead negotiator for the six powers in talks, said at the end of two days of meeting Tuesday that "significant gaps" remain between the two sides.
U.S. officials insisted that neither they nor their partners changed their demands in Moscow, or offered any sanctions relief before Iran takes steps to start meeting the international community's demands. In fact, the timing of the July 3 meeting, two days after a ban on Iranian oil purchases goes into effect in Europe, is a sign that Iran hasn't won any easing or postponing of sanctions, they said.
In the weeks leading to the talks, Iran likewise took a tough stance, with Iranian officials reiterating the Islamic Republic's position that enriching uranium is an "absolute right" under the Non-Proliferation Treaty.
Mr. Jalili, the Iranian chief negotiator, told Iranian reporters before entering the talks on Monday that this round of talks was really " a test on whether the West is for or against Iran's scientific progress."
Iran's Supreme Leader Ayatollah Ali Khamenei, who has the last word on all state matters, indirectly made a reference to the nuclear talks in a speech on Monday making it clear where Iran stands on compromise.
"Our enemies should know that arrogance and un-substantiated demands from Iran will lead to nowhere," Mr.Khamenei said, according to official media. He also said Iran's resistance and progress stands as an example of standing up to injustice in the world.
—Farnaz Fassihi and Jay Solomon contributed to this article.
A version of this article appeared June 20, 2012, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: Sanctions for Iran as Talks Fail.
