Capping a long campaign to take the nuclear row to the security council, Mr Schulte said: "The time has now come for the security council to act ... It should emphasise that Iran will face consequences if it does not meet its obligations."

Iran reacted furiously, squaring up to the US and making implicit threats to use oil as a weapon against it.

"Let the ball roll," said Javad Vaeidi, the deputy head of Iran's national security council, using the words used against Iran at the weekend by the US hawk and ambassador to the UN, John Bolton.

"The United States may have the power to cause harm and pain. But it is also susceptible to harm and pain," he said.

Despite talk all week of a compromise brokered by the Russians which could have allowed all sides to save face and resume negotiations, the IAEA meeting ended with positions more entrenched - the Iranians determined to retain the uranium enrichment programme at the core of the dispute, and the Americans calling the shots in what is decided by the security council.

The Russian foreign minister, Sergei Lavrov, said yesterday that imposing sanctions on Iran would not convince it to curb its nuclear ambitions.

While the Europeans and the Americans said the security council would proceed cautiously, diplomats predicted that the dispute could escalate rapidly when it moves to New York next week.

Mr Schulte said Iran had 85 tonnes of uranium stockpiled for enrichment - enough for 10 nuclear bombs - and that it was bent on building the capacity to process the material.

A statement by Britain, France and Germany said action by the security council was inevitable. There was "no credible civil use" for the stockpile of uranium gas that can be processed into fissile material.

Resorting to special inspections would be "much more intrusive" than the IAEA's ongoing inspections in Iran, said a diplomat. But was up to the IAEA to decide.

Iran denies wanting nuclear weapons and says it is only interested in the peaceful generation of electricity. It has also threatened to retaliate if Israel or the United States were to bomb any of its nuclear facilities.

In 1981, Israel bombed Iraq's Osirak nuclear reactor to prevent Saddam Hussein from getting nuclear weapons. Saddam's covert atom bomb program continued until U.N. inspectors dismantled it after the 1991 Gulf War, but the Israeli strike set progress back many years.

"The Israeli approach is that the U.S. and the European countries should lead the issue of the Iranian nuclear program to the table of the U.N. Security Council, asking for sanctions. And I hope the sanctions will be effective," Mofaz said.

Mofaz, who was born in Iran, added that Israel believed the 15-nation Security Council should grant the International Atomic Energy Agency (IAEA), the U.N.'s Vienna-based nuclear watchdog, sweeping inspection powers so that it can smoke out any secret nuclear arms-related activities in Iran.

"We need to have very deep and large inspections within all the nuclear locations in Iran because Iran has two nuclear programs -- one is a covered one and the second is uncovered," he said.

The Iranian delegation to an IAEA board of governors meeting in Vienna issued a statement earlier warning that the United States could feel "harm and pain" if the Security Council took up the issue of Tehran's nuclear fuel research and vowed never to abandon its atomic program.

At a news conference with Mofaz, Jung told reporters Germany was already discussing with the five permanent Security Council members -- Russia, China, the United States, Britain and France -- what the council could do to prevent Tehran getting the bomb.

"Everything must be done to ensure that Iran does not acquire nuclear weapons," Jung said.

A senior diplomat from one of the "EU3" said earlier that the Security Council would probably begin discussing Iran next week and hoped to issue a "presidential statement" urging Iran to suspend its uranium enrichment program and cooperate with the IAEA.

While Iran was now Israel's most serious strategic and existential threat, Israel was sufficiently protected by the Arrow, which plays a major role in maintaining Israel's protective envelope, he said.

"We will shoot all of [Iran's missiles] down," he told the Post. "The Arrow knows how to intercept the Shihab missile."

The increased Israeli confidence follows an ambitious crash program that was undertaken last year to upgrade the Arrow, which is co-produced by Israeli Aircraft industries and Boeing.

Appearing before the Knesset's Foreign Affairs and Defense Committee last year Brig. Gen. Ilan Bitton -- head of Israel's Air Defense Forces -- admitted that while the Arrow was highly effective against the Scud missiles that make up most of Syria's arsenal, it "needed improvement" to face the challenges posed by Iran's Shihab-3.

However, in December 2005, Israel carried out a highly successful test of the upgraded Arrow-2 system against a ballistic missile configured to perform like a Shihab-3. Reflecting the success of that test, the Israeli officer it was now able to detect even a missile carrying a split warhead and armed with decoys meant to fool the anti-missile system.

Asked about the danger of the Arrow taking out a non-conventional or nuclear missile over Israel, the officer said that the incoming missile would be destroyed at such a high altitude that it would disperse and destroy its payload without causing any casualties, the Jerusalem Post said.

"There is constant pressure to always stay a step ahead of our adversaries," the officer told the paper. "They developed decoys on their missiles and we developed ways to detect the decoys and to be able to accurately strike the incoming threat."

The Arrow 2 was last tested in December and succeeded in intercepting an incoming rocket simulating an Iranian Shihab at an altitude higher than ever before tested in the previous 13 Arrow launches. While the Arrow was Israel's first line of defense against an Iranian-launched missile, air force Patriot batteries -- known for their action during the first Gulf War -- also followed incoming missiles and served as the country's back-up interception system.

Israel has at least two operational Arrow batteries, with reportedly hundreds of missiles for each battery. One is stationed at Palmahim to protect Tel Aviv and the other is at Ein Shemer near Hadera in the north, the Jerusalem Post said.