Bolstered by other world powers, US president Barack Obama has demanded that Iran come clean about its nuclear programme or face "sanctions that have bite" after the disclosure of a secret uranium enrichment plant.
Issuing a stern warning to Iran at the end of a Group of 20 summit in Pittsburgh, Mr Obama pointedly declined to rule out the military option in dealing with the bitter standoff with Tehran but insisted he preferred to resolve it diplomatically.
Mr Obama stood earlier in the day with the leaders of Britain and France in accusing Iran of working in secret for several years to build a covert underground plant for enriching uranium that could be used for developing nuclear weapons.
"The international community has spoken. It is now up to Iran to respond," Mr Obama said at a closing news conference.
The fresh disclosure of the scope of Iran's disputed nuclear program added a new sense of urgency to Tehran's much-anticipated talks with the United States and five other powers next Thursday in Geneva.
Iran has maintained its nuclear programme is strictly for peaceful electricity generation.
Today it emerged that the facility under construction will soon become operational, according to an aide to supreme leader Ayatollah Ali Khamenei.
"This new plant, God willing, will soon become operational," Mohammad Mohammadi-Golpayegani, who heads Mr Khamenei's office, said, according to the semi-official Fars News Agency.
US officials said Iran started building the covert plant as an alternate site for possible weapons development since the International Atomic Energy Agency's scrutiny at its Natanz facility made it difficult to conduct such activities there.
Iranian president Mahmoud Ahmadinejad said the plant was 18 months from starting operations and Western powers would regret accusing Iran of hiding it.
"It's not a secret site," Mr Ahmadinejad told a news conference in New York where he was attending the UN General Assembly.
Mr Ahmadinejad said Israel, Iran's arch-foe in the region, "wouldn't dare to attack" and that Iranians were able to defend themselves.
Iran acknowledged the existence of the facility for the first time Monday in a letter to the IAEA, a belated disclosure US officials said was meant to beat Western governments to the punch.
Mr Obama said the United States and its allies were "absolutely" confident of their intelligence on the clandestine nuclear site.
Mr Obama put the onus on Iran to address international concerns in next week's talks.
"They are going to have to come clean and they are going to have to make a choice" between isolation and giving up nuclear weapons ambitions," he said.
"When we find that diplomacy does not work, we will be in a much stronger position to, for example, apply sanctions that have bite."
Britain, France and Germany also raised the specter of tough new sanctions and Russia - previously reluctant to go along with further penalties - showed greater willingness to consider such action.
China expressed concern about Iran's nuclear activities and urged Tehran to cooperate with the UN inspectors but said it still wanted a negotiated solution.
Western leaders hope the latest development will give them greater leverage with the international community to impose new sanctions on Iran if it remains resistant. But the diplomatic offensive could also further entrench Tehran's defiance.
Adding to the tension, Iranian media said Iran's elite Revolutionary Guards would hold missile defence exercises starting tomorrow and taking place over several days.
Reuters