Obama warns Iran of consequences over nuclear standoff

US president Barack Obama issued a strong warning to Iran on Thursday of consequences of its failure to respond to the offer of a nuclear deal and could have a package of steps to take "within weeks".

But Iran's foreign minister rejected talk of further sanctions, saying the West had learnt from "failed experiences" of the past.

Iran on Wednesday rejected a deal to send enriched uranium abroad for further processing, defying Washington and its allies which had called on Tehran to accept a deal which aimed to delay Iran's potential ability to make bombs by at least a year by divesting the country of most of its enriched uranium.

The UN nuclear watchdog, the International Atomic Energy Agency (IAEA), had said Iran should send some 75% of its low-enriched uranium to Russia and France, where it would be turned into fuel for a Tehran medical research reactor.

"Iran has taken weeks now and has not shown its willingness to say yes to this proposal ... and so as a consequence we have begun discussions with our international partners about the importance of having consequences," Obama said at a joint news conference with South Korean President Lee Myung-bak during a visit to Seoul.

He said Iran would not be given an unlimited amount of time, likening the Iranian nuclear issue to the years of stop-and-start negotiations with North Korea about its nuclear ambitions.

"We weren't going to duplicate what has happened with North Korea, in which talks just continue forever without any actual resolution to the issue," said Obama, who has advocated a policy of increased engagement, rather than confrontation, on thorny international issues.

In Manila, visiting Iranian foreign minister Manouchehr Mottaki dismissed the possibility of further sanctions.

"Sanction was the literature of the 60s and 70s," he said at a news conference. "I think they are wise enough not to repeat failed experiences," he said, speaking through an interpreter. "Of course it's totally up to them."

Mottaki said Tehran was willing to discuss the plutonium deal but only if the swap of enriched uranium for nuclear fuel took place within Iran.

"Iran raises its readiness in order to have further talks within the framework which is presented," he said.

"It's not our proposal to have a swap," he added. "They raised such a proposal and we described and talked about how it could be operationalised."

Obama said he still hoped Iran would change its mind and that Washington and its allies would consider a package of potential steps to indicate to Iran their seriousness.

"Our expectation is that, over the next several weeks, we will be developing a package of potential steps that we could take, that would indicate our seriousness to Iran," he said.

He said he had confidence in the approach to Iran.

"I continue to hold out the prospect that they may decide to walk through this door. I hope they do," he said.

"But what I'm pleased about is the extraordinary international unity that we've seen. If you think at the beginning of the year, how disjointed international efforts were and how uneven perceptions were about Iran's nuclear programme, and where we are today, I think it's an indication that we've taken the right approach."

Russia and France, which are both also involved in the fuel proposal, also pressed Iran to accept it as is. Tehran faces possible harsher international sanctions and risks even Israeli military action to knock out its nuclear sites.

Iran says it needs nuclear technology to generate power but its history of secrecy and restricting UN inspections have raised Western suspicions of a covert quest for atom bombs.

Tehran has repeatedly said it preferred to buy reactor fuel from foreign suppliers rather than part with its low enriched uranium (LEU) -- also bomb material if refined to high purity.