The US and Europe are to demand that Iran dismantle its fortified underground nuclear facility and halt higher-grade uranium enrichment at a new round of talks this week as a condition for lifting sanctions and the threat of a military attack – demands that Tehran swiftly denounced as "irrational".

Barack Obama has reiterated that Washington is prepared to accept Tehran maintaining a peaceful nuclear power programme, but at the same time the White House is becoming more explicit in warning that the negotiations beginning in Istanbul on Friday are "perhaps a last chance" for diplomacy to work.

Diplomats say Iran will be pressed by the permanent UN security council members plus Germany, known as the P5+1, to shut its underground nuclear facility at Fordo, to stop enriching uranium to 20%, and to hand over the estimated 100kg of uranium already enriched to that level.

The demands match those made by Binyamin Netanyahu at a White House meeting last month at which Obama pressed the Israeli prime minister to hold off from a military attack on Iran and give sanctions and diplomacy an opportunity to work. Britain and France are also pushing for Iran to dismantle those parts of its nuclear programme that could be used for weapons.

Netanyahu repeated the three requirements in a meeting with the Italian prime minister, Mario Monti, on Sunday. He also warned against allowing Iran to use the talks "to delay and deceive".

The Israeli prime minister also said in an interview with Maariv newspaper (link in Hebrew) at the weekend that the underground nuclear facility at Fordo must be shut down.

"What do they need it for?" he asked. "I think we should make very explicit demands about ending all enrichment and the removal of enriched material and converting the nuclear programme back [to non-military use]. If we come with clear requirements along with the threat of more sanctions then it's possible there could be a result. But if there are sanctions without demands, then the sanctions will not help. Our goal is not the talks but the result. The result is an end to Iran's nuclear programme."

Iran has said it will not close the Fordo facility nor surrender enriched uranium. The head of Iran's Atomic Energy Organisation, Fereydoon Abbasi-Davani, told the Iranian state news agency both demands were irrational. He said the Fordo facility was built underground because of the threat of attack by Israel and the US.

"If they do not threaten us and guarantee that no aggression will occur, then there would be no need for countries to build facilities underground. They should change their behaviour and language," he said. "We do not see any rationale for such a request from the P5+1".

However, he repeated the Iranian leadership's assertion that Tehran has no intention of producing large amounts of 20% enriched uranium.

It is not clear that Washington can carry all of the P5+1 in pressing the demand for Fordo to be dismantled, particularly with Russia and China prepared to give Tehran room for manoeuvre. One diplomat suggested that Washington may be emphasising the issue in order to satisfy the Israelis but that the group may be prepared to settle for an agreement to freeze the number of centrifuges at Fordo, which are believed to be too few to produce weapons-grade uranium at a pace sufficient to develop a bomb in the foreseeable future.

Israel's defence minister, Ehud Barak, made little mention of the Fordo facility itself and instead dwelled on the uranium on Sunday. He warned that for the major powers to accept anything less than the demand for an end to enrichment would be a victory for Tehran.

Barak told CNN: "We told our American friends as well as the Europeans that we would have expected the pressure for successful negotiations to be clear – namely that the P5+1 will demand clearly, no more enrichment to 20% [and] all the already enriched 20% material out of the country."

"But if the P5+1 will settle for a much lower threshold, like just stop enriching to 20%, it means that basically the Iranians, at a very cheap cost, bought their way into continuing their military programme. Slightly slower but without sanctions. That will be a total change of direction for the worse."

The Israeli defence minister added that while oil and banking sanctions have clearly had an impact, causing inflation in Iran to nearly double to 21.5% in urban areas, he doubted they would be enough to force Tehran's hand.

"We hope for the better but I don't believe that this amount of sanctions and pressure will bring the Iranian leadership to the conclusion that they have to stop their nuclear military programme."

Barak repeated his view that while matters will not come to a head within weeks, it will not take years, either.

Israel is itself an undeclared nuclear power with an undetermined number of atom bombs.

Obama continues to throw his weight behind diplomacy and sanctions while warning he will use force as a last resort. Washington, however, does not believe there is the urgency that Israel claims, in part because the White House is sceptical that Iran is as close to being able to develop a nuclear weapon as Netanyahu says.

Last month in Washington, the Israeli prime minister publicly derided sanctions and claims that Tehran is not already engaged in developing a nuclear weapon.

The US president has sent several messages to Tehran in recent days warning that this is perhaps the last chance to negotiate an end to the crisis. The most recent was passed via the Turkish prime minister, Recep Tayyip Erdogan, at a meeting in South Korea on nuclear non-proliferation.

The US secretary of state, Hillary Clinton, has also pressed the message that time is running out for negotiations. She said last week that the US was taking part in the talks in Turkey because they may be "a last chance to demonstrate a way forward that can satisfy the international community's concerns and have Iran come forward and accept limitations on what they are able to do".

Clinton warned that she did "not want the Iranians to go into it with the attitude of that we can just keep it open and never have to come to any outcome".

The talks will be the first in more than a year. The last round failed after Iran refused to abide by UN resolutions to stop enriching uranium to higher grades.