US President Donald Trump on Monday told Iran to change its "destabilizing" behavior or risk further economic isolation, hours before the reimposition of sweeping sanctions against Tehran, though he left the door open to a new nuclear deal.

After Trump pulled Washington out of the historic 2015 multilateral accord in May, to the consternation of his European partners, a new pact seemed unlikely in the short term, given his conditions -- and Tehran's anger.

Against a backdrop of political turmoil and protests in Iran, Foreign Minister Mohammad Javad Zarif himself accused Trump of "bullying" and of being isolated in his hostility to the Islamic Republic.

A first phase of US sanctions against Iran goes into effect overnight, targeting Iran's access to US banknotes and key industries including cars and carpets.

"The Iranian regime faces a choice," Trump said in a statement. "Either change its threatening, destabilizing behavior and reintegrate with the global economy, or continue down a path of economic isolation."

"I remain open to reaching a more comprehensive deal that addresses the full range of the regime's malign activities, including its ballistic missile program and its support for terrorism," the Republican leader added.

Renewed US hostility has already sparked a run on Iran's currency, which has lost around half its value since Trump's announcement.

It has added to tensions inside Iran, which has seen days of protests and strikes in multiple towns and cities over water shortages, high prices and wider anger at the political system.

Severe reporting restrictions have made it impossible to verify the swirl of claims coming through social media, though journalists confirmed a heavy build-up of riot police Sunday night in the town of Karaj, just west of Tehran, that has been a focal point of unrest, and said mobile internet had been cut in the area.

Zarif lashed out at Trump, but acknowledged there were difficult times ahead.

"Of course, American bullying and political pressures may cause some disruption, but the fact is that in the current world, America is isolated," Zarif told reporters, according to the semi-official ISNA news agency.

Iranian President Hassan Rouhani is due to give a televised address to the nation at 21:40 pm (1710 GMT) Monday to outline plans for tackling the currency decline and impact of sanctions.

- European dismay -

The second phase of US sanctions, which takes effect November 5 and will block Iran's oil sales, is due to cause more damage, though several countries including China, India and Turkey have indicated they are not willing to entirely cut their Iranian energy purchases.

EU diplomatic chief Federica Mogherini said the bloc, as well as Britain, France and Germany, deeply regretted the move by Washington.

"We are determined to protect European economic operators engaged in legitimate business with Iran," she said in a statement.

But many large European firms are leaving Iran for fear of US penalties.

"Individuals or entities that fail to wind down activities with Iran risk severe consequences," Trump said.

Rouhani's remarks on Monday are keenly awaited.

His government eased foreign exchange rules on Sunday, allowing unlimited tax-free currency and gold imports, and reopening exchange bureaus after a disastrous attempt to fix the value of the rial in April led to widespread black-market corruption.

With senior religious authorities calling for a crackdown on graft, the judiciary said Sunday it had arrested the vice-governor of the central bank in charge of foreign exchange, Ahmad Araghchi, along with a government clerk and four currency brokers.

The measures appeared to calm the markets on Monday, with the rial strengthening to 95,500 to the dollar -- a 20 percent improvement on its record-low of 119,000 a fortnight ago.

- Sanctions and talks -

Two countries that have welcomed increased pressure on Iran are its key regional rivals, Israel and Saudi Arabia.

Israeli Defense Minister Avigdor Lieberman described the renewed sanctions as "a courageous decision which will be remembered for generations."

After months of fierce rhetoric, Trump surprised observers last week when he offered to meet with Rouhani without preconditions.

But Zarif suggested it was hard to imagine negotiating with the man who tore up an agreement on which Iran and world powers had spent the "longest hours in negotiating history."

There have been ongoing rumors that Trump and Rouhani could meet in New York in September at the UN General Assembly -- though Rouhani reportedly rejected US overtures for a meeting at last year's event.

But that came less than a fortnight after a bellicose exchange between the two presidents, with Rouhani warning of the "mother of all wars" and Trump responding with a Twitter tirade against Iran's "DEMENTED WORDS OF VIOLENCE."

burs-wat/sst

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As sanctions bite, where next for Trump's Iran strategy
Washington (AFP) Aug 6, 2018
A wave of US sanctions kicks in against Iran on Tuesday, cementing Washington's hard line against Tehran after President Donald Trump pulled out of the 2015 nuclear pact. Already facing broad economic fallout as their currency implodes, Iranians are wondering how the next phase of the crisis in US relations will play out - and what, exactly, America's long-term strategy is toward their country. At least for now, the US is fixated on bringing as much diplomatic and economic pressure to Iran as p ... read more