Story highlights Israeli deputy prime minister says sanctions deserve a chance to work

Iran's foreign minister predicts an improvement in relations with Europe

U.N. watchdog agency: Iran needs to clarify "possible military dimensions" of nuclear program

Israel has made clear it sees a nuclear-armed Iran a threat to its existence

Officials with the U.N. nuclear watchdog agency begin a second round of talks Monday with Iranian officials over the country's nuclear program, a day after Tehran cut off crude exports to British and French companies in retaliation for a new round of sanctions imposed on the regime.

The two days of talks come amid heightened tensions in the region, with Israel making clear it is pondering an attack on Tehran's nuclear infrastructure, while Iran warned it could cut off the narrow strait through which oil tankers sail in and out of the Persian Gulf.

The scheduled talks between the International Atomic Energy Agency and Iranian officials are billed as an opportunity for the watchdog agency to get more clarity about the "possible military dimensions to Iran's nuclear program," the group said.

Iran's official Islamic Republic News Agency cited the head of the IAEA mission as saying it would take time to resolve Iran's nuclear issue because it is complicated.

Mission head Herman Nackaerts is the IAEA deputy director general responsible for ensuring that countries are not secretly developing nuclear weapons.

Iran says it is producing enriched uranium to fuel civilian power plants and has refused international demands to halt its production.

But the IAEA reported in November that it had information to suggest Iran had carried out some weapons-related research.

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U.N. Secretary-General Ban Ki-moon said it is up to Iran to disprove the allegation.

"The agency is committed to intensifying dialogue. It remains essential to make progress on substantive issues," IAEA Director General Yukiya Amano said in a statement following the first round of talks in January.

The talks in Tehran follow an announcement Sunday by Iran's oil ministry that it was halting crude exports to French and British companies, an order following a threat that Iran would cut oil exports to some European Union countries in retaliation for sanctions put in place last month by the EU and the United States.

"Iran has no difficulty in selling and exporting its crude oil. ... We have our own customers and have designated alternatives for our oil sales. We shall sell to new customers, who will replace French and UK companies," ministry spokesman Ali Reza Nikzad-Rahbar said in a statement.

But Foreign Minister Ali Akbar Salehi said Monday he expected relations with Europe to improve.

The two sides need each other, the semiofficial Mehr News Agency quoted him as saying.

"I believe that relations will return to their earlier state," Salehi said in Tehran, Mehr reported.

The sanctions put in place last month are meant to force Iran to provide more information on its nuclear program by shutting off its sales of crude oil, which generates half of Iran's revenue.

Iran exports 2.2 million barrels of oil a day, 18% of which is bound for European markets, according to the U.S. Energy Information Administration. The world consumes about 89 million barrels of oil per day.

U.S. and European sanctions are already squeezing Iran's economy, driving down its currency and driving up consumer prices.

Israeli Defense Minister Ehud Barak has called for tougher sanctions, saying that accelerating the pace of sanctions would force Tehran to return to nuclear talks.

Iran proposed a resumption of those stalled talks last week. U.S. and European diplomats were still trying to gauge the sincerity of the Iranian offer, but U.S. Secretary of State Hillary Clinton called it "an important step."

Israel has made clear it considers a nuclear-armed Iran a threat to its existence and has suggested it is considering an attack on Tehran's nuclear infrastructure.

However, the sanctions deserve a chance, Israeli Deputy Prime Minister Dan Meridor said Monday.

"I think that the Iranians will have to reconsider the price they are paying," he said. "... If they see it is getting higher and higher, then they may want to look for a way to go lower and lower on the scales where they are to a non-nuclear Iran.

"Am I sure? No, I am not sure," he said. "Does it deserve a chance? It does deserve a chance, and I think there is a chance of success if it is done with the determination and leadership."

Meridor, who also is minister of intelligence and atomic energy, is part of Israel's security Cabinet, which would vote on any decision to launch an Israeli military strike against Iran.

The United States believes talk of military strikes against Iran's nuclear program is "premature" and has advised Israel that an attack would be counterproductive, Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, said Sunday on CNN's "Fareed Zakaria GPS."

Dempsey said U.S. officials aren't convinced Iran has decided to pursue nuclear weapons. Meanwhile, economic and diplomatic sanctions appear to be taking a toll on the Islamic republic, he said.

"On that basis, I think it would be premature to exclusively decide that the time for a military option was upon us," Dempsey said.

U.S. Sen. John McCain, who is in Cairo, said Monday that Israel understands the threat to its nation, and "I think their judgment is going to be made on their view of what the threat is."

President Barack Obama has made clear that a nuclear-armed Iran is "unacceptable," McCain said, "and I'm sure the Israelis view that the same way. After all, they're probably the first target."

Dempsey said American officials believe an Israeli strike would delay Iran's nuclear development "probably for a couple of years, but some of the targets are probably beyond their reach." He said he and others have had "a very candid, collaborative conversation" with the Israelis about the issue.

"I'm confident that they understand our concerns, that a strike at this time would be destabilizing and wouldn't achieve their long-term objectives," he said. "But, I mean, I also understand that Israel has national interests that are unique to them. And, of course, they consider Iran to be an existential threat in a way that we have not concluded that Iran is an existential threat."

Tensions between Iran and Israel have been further heightened in recent days with two Iranian warships sailing through Egypt's Suez Canal into the Mediterranean Sea.

It's only the second time such ships have crossed through the Suez Canal since Iran's 1979 revolution.

Iran's Press TV reported Monday that the two ships had docked Saturday in the Syrian port of Tartus, where the crews were to provide maritime training to Syrian naval forces.

"Iran invests a lot in trying to save the Syrian regime by advising them, by supplying equipment, by sending people to help them and by maybe sending the ships," Meridor told reporters Monday. "... One needs to see how much they invest in trying to save this cruel regime."

Syria, he said, is the "only ally Iran has in the Arab world. The rest of the Arab world is very concerned with what happens in Iran."

Yigal Palmor, spokesman for the Israel's Foreign Ministry, said, "If the boats come near our territorial waters, we will monitor them very closely."

Press TV also reported Monday that Tehran has begun "the key and final phase" of military drills by the Islamic Revolutionary Guards Corps ground forces to improve combat preparedness. The drills began last month, Press TV said.