The world should tighten the squeeze on Iran over its "mad" nuclear plans to the point where the regime's survival is threatened by its own people, Britain's defence secretary said Sunday.

Philip Hammond told The Observer newspaper that there were signs the regime was beginning to "fracture" on the issue of its disputed nuclear programme.

The West worries Iran is trying to develop an atomic bomb under cover of a civilian nuclear energy programme but Tehran insists its intentions are purely peaceful.

Hammond's comments come ahead of a meeting of European Union ministers on October 15, when Britain, France and Germany will press for toughening up sanctions on Iran's energy sector and financial institutions.

"There is talk of a general trade embargo and of shutting down the remaining access that Iran has to international banking channels. We can definitely make the pain much greater," he told the weekly.

"The only thing that is likely to budge the regime is if they see or sense an existential threat.

"If the level of economic pressure starts to translate into potentially regime-threatening disruption and dissent on the streets of Tehran, then they may change course."

In one week, Iran's rial currency has shed around 40 percent of its value, sharply accelerating a slide that has gone on over the course of this year as Western sanctions have worsened the Islamic republic's underlying economic woes.

"There is evidence that the leadership is beginning to fracture over this question. They are beginning to turn on each other as the pain gets transmitted through. And they can end it all instantly," Hammond said.

"Their professed position is that they're enriching uranium for peaceful purposes. Nobody believes them."

He stressed that nobody was out to cause more suffering for the Iranian people and said regime change was not the aim -- it was merely to apply the pressure needed to force Tehran to drop its nuclear programme.

"There is further tightening we can do," Hammond said.

"We can definitely make the pain much greater. Nobody wants to cause the Iranian people to suffer unnecessarily but this mad scheme to build a bomb has to be brought to an end."