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Iran (search) is "thumbing its nose" at a proposed international deal on its nuclear ambitions, the State Department said Monday, but the Bush administration seemed in no hurry to invoke punitive economic sanctions.

Iran resumed uranium conversion activities at its Isfahan nuclear facility, a step that Europeans and the United States have warned in the past would prompt them to seek United Nations sanctions.

"This is Iran thumbing its nose at a productive approach" by European negotiators, State Department spokesman Adam Ereli said.

Ereli said Washington will support European efforts "to get this process back on track," although it is not clear that negotiators have many options if Iran refuses to budge.

"I don't want to predict an outcome of what will happen and when," Ereli said.

A senior State Department official, speaking on condition of anonymity because no final decision has been made, said the United States still hopes that negotiators "can put the genie back in the bottle."

No new incentives would be offered to Iran, the official said.

Iran had agreed to suspend nuclear activities last fall while negotiating with Britain, France and Germany over ways to stop any attempt to build a bomb. Iran claims its nuclear activities are for peaceful purposes, but the United States and international observers claim Iran is hiding a bomb program.

Tehran's decision to restart nuclear work came a day ahead of an emergency international meeting in Vienna on Iran's nuclear program. The newly elected hardline government in Tehran rejected a package of incentives from the Europeans last week and replaced its lead negotiator.

The United States, which has had no official dealings with Iran since radical students took diplomats and others hostage at the U.S. Embassy in Tehran in 1979, agreed to support the European approach but did not take part in the negotiations.

Neither the United States nor the Europeans have declared the negotiations dead, and the U.S. reticence on sanctions Monday appeared to represent a last hope that Iran might change its mind.

The meeting of the International Atomic Energy Agency's (search) 35-nation board of governors was expected to produce a sharply worded warning to Iran. The agency could then refer the issue to the U.N. Security Council, which has the power to impose economic sanctions.

Separately Monday, the State Department said there is no decision yet on whether Iran's new president, Mahmoud Ahmadinejad (search), will be granted a U.S. visa in order to attend the United Nations' huge General Assembly gathering in New York next month.

No world leader has ever been denied a visa for the annual event, no matter their relations with the United States, but Ereli would not rule out that Washington might refuse entry to Ahmadinejad because of uncertainty about his role in events surrounding the embassy takeover in 1979.

The United States is "mindful" of its obligations as the host country of the United Nations, Ereli said, and is reviewing Ahmadinejad's visa request.

"We also take very seriously information that someone has been involved in hostage-taking of American citizens in contravention of international law and international practice," he said. "And that certainly is a relevant consideration in the matter at hand."