A defiant Iran threatened on Thursday to downgrade ties with the UN atomic energy watchdog in response to new UN sanctions targeting its controversial nuclear programme of uranium enrichment.

Diplomats said Tehran was wavering between confrontation or opting for talks after being abandoned by allies Moscow and Beijing, which voted for Wednesday's UN Security Council sanctions resolution.

An official warned that Iran could reduce its ties with the International Atomic Energy Agency (IAEA).

"The majlis (parliament)... will adopt on Sunday a top priority bill which talks of decreasing ties with the IAEA," Esmaeel Kosari, a member of its committee on national security and foreign policy, told Fars news agency.

The move comes as hardline President Mahmoud Ahmadinejad led a chorus of criticism after a fourth round of sanctions was adopted by the UN Security Council over Tehran's nuclear programme.

"These resolutions are not worth a dime for the Iranian nation," said Ahmadinejad, who had earlier threatened to suspend negotiations with six major powers if new sanctions were imposed.

He said he had told world powers "that the resolutions you issue are like a used hanky which should be thrown in the dust bin."

Many world powers suspect that Iran is seeking to manufacture a nuclear weapon through uranium enrichment, but Tehran insists its nuclear ambitions are purely peaceful.

On Thursday, a source in Russia's Federal Service for Military Technical Cooperation, which oversees arms sales, told the Interfax news agency Moscow had frozen a contract to deliver S-300 air defence missiles to Tehran following the new resolution.

"It is compulsory to fulfill a decision by the UN Security Council and Russia is not an exception here. Naturally, the contract for the delivery to Tehran of the S-300 air defence missile systems will be frozen," the source said.

But Foreign Minister Sergei Lavrov later said the sanctions would not hurt Russia's S-300 missile supplies to Iran.

"As far as military-technical cooperation is concerned, the resolution introduces limits to cooperation with Iran on offensive weapons and defensive weapons do not fall under these limits," Lavrov told reporters in Tashkent.

US State Department spokesman Philip Crowley noted that the S-300s are not included in the latest UN sanctions, but said "we have recognised and appreciated the restraint that Russia showed up to this point."

Russia agreed the missile deal years ago but never delivered the weapons amid pressure from Washington and Israel, which fear they would dramatically improve Iran's air defence capabilities.

Neither the United States nor Israel has ruled out military action to prevent Iran from developing nuclear weapons.

Arab states criticised Israel on Thursday at an IAEA meeting in Vienna, calling on the Jewish state to come clean about its nuclear capability.

Israel is widely believed to be the only nuclear-armed power in the Middle East, but maintains a policy of deliberate ambiguity.

Lavrov also said Russia and Iran were in talks to build more nuclear reactors for the Islamic republic.

"We have secured absolute protection for all the principally important channels of trade and economic cooperation which exist between Russia and Iran," he said.

"The resolution does not put up any barriers to these ties, including not only the completion of the Bushehr project but also the construction of any number of new light water reactors such as the Bushehr type," he added.

He declined to elaborate on the plan for the new reactors, calling it a "commercial secret."

Iran's first nuclear power plant at Bushehr is set to come online by the end of this summer.

Despite the new sanctions on Iran, world powers are maintaining a dual-track approach.

US President Barack Obama called the latest measures against Iran the "toughest-ever," but added that they "do not close the door on diplomacy."

"Iran continues to have the opportunity to take a different and better path," he said.

Diplomats said the sanctions could soon be augmented by further measures.

"More unilateral sanctions from the US and the EU are expected soon, which would significantly damage the economy," one diplomat told AFP in Tehran.

The European Union may go even further than the United Nations, diplomats in Brussels said on Thursday.

"That proposal is for the EU to come up with different sanctions, that we go further than the UN," one diplomat said, adding that "it is more likely that additional sanctions on behalf of the European Union will be imposed."

burs/srm