Meanwhile, the Security Council held informal talks on a draft text agreed last week by foreign ministers of the council's five veto-wielding permanent members -- Britain, China, France, Russia and the United States -- plus Germany.

Asked if the text hammered out in Germany last week fell short of US expectations, Rice replied it was "no secret that a resolution of that kind is a negotiated product" that reconciles different views.

"The important thing is that it both deepens ... sanctions against Iran and opens the possibility of new directions, like for instance the possibility of cargo inspections," Rice told a press conference with Australian Foreign Minister Stephen Smith.

"But most importantly, it is a resolution that shows and will show Iran that it continues to be isolated from the international community, that it has no friends when it comes to its desires to pursue technologies that could lead to a nuclear weapon," she added.

The draft resolution would form the basis of a third set of economic and trade sanctions against Iran for defying Security Council demands to stop uranium enrichment activities.

But Tehran on Monday warned of "serious consequences" if it is adopted.

Rice also promised more action against Iran outside of the UN Security Council, recalling that the United States has already imposed sanctions on several Iranian financial institutions.

"That has made it difficult for many others to deal with Iran because the reputational and investment risk of dealing with an Iran .... are quite grave," as it is also under UN Chapter 7 sanctions, she added.

"As to whether or not we can improve the state of US-Iranian relations, that's something that I would put to Iran," Rice said, recalling that the condition is for Tehran to suspend its uranium enrichment and reprocessing.

"Those activities allow them to perfect the technologies that can produce the fissile materials that are needed for a bomb," she said.

Smith, the foreign minister, said: "Australia very much supports the efforts of the United States within the Security Council to apply maximum pressure by way of Security Council resolution on Iran.

"Progress is only made in this area if there is significant international pressure on Iran," he said, adding his government had an "open mind" about what further pressure could be brought to bear on Tehran.

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