U.S. says diplomacy is focus in Iran efforts

By Sue Pleming

WASHINGTON (Reuters) - The United States has not exhausted all diplomatic options against Tehran, a senior U.S. official said on Wednesday, adding that Iran had made only "modest" progress in its nuclear program due to U.N. sanctions.

"We view force as an option that is on the table but a last resort," said U.S. Under Secretary of State for political affairs William Burns. "We do not believe we have exhausted all the diplomatic possibilities."

Burns, testifying on Iran to a congressional panel, said the costs would be high to Tehran if it continued on its current course. But he appeared to play down the immediate threat from a nuclear program that the West believes is to develop an atomic bomb but that Tehran says is for purely civilian energy purposes.

"While Iran seeks to create the perception of advancement in its nuclear program, real progress has been more modest," he said.

"It is apparent that Iran has not yet perfected enrichment (of uranium), and as a direct result of U.N. sanctions, Iran's ability to procure technology or items of significance to its missile programs, even dual-use items, is being impaired."

His testimony came amid increased tensions with Iran, which on Wednesday test-fired nine missiles it said could reach Israel and U.S. assets, and warned Washington and Israel it was ready to retaliate for any attack over its nuclear projects.

Defense Secretary Robert Gates said Washington was no closer to confrontation with Iran following the missile test.

"There is a lot of signaling going on. But I think everybody recognizes what the consequences of any kind of a conflict would be," the Pentagon chief told reporters.