The envoys from the five veto-wielding permanent members of the Security Council -- Britain, China, France, Russia and the United States -- plus Germany were building on elements of a text agreed by their foreign ministers in Berlin Tuesday, according to two Western diplomats who spoke on condition of anonymity.

One diplomat said the sponsors wanted to circulate a new sanctions draft "to the full Council expeditiously."

Britain, France and Germany have been spearheading efforts to negotiate an end to the nuclear standoff with Iran, which denies Western charges that it is seeking a nuclear weapons capability under the guise of its civilian nuclear program.

The new draft would slap a third set of economic and trade sanctions against Iran for defying Security Council demands to halt uranium enrichment activities that the West fears could be used to make a nuclear bomb.

In Jerusalem, the US State Department's third highest-ranking diplomat insisted on Thursday that the new sanctions resolution against Iran would be "punitive."

"This is a punitive resolution. I say this because I saw some comments yesterday from Moscow that it wasn't. It is," said Nicholas Burns, the US outgoing under secretary of state for political affairs, after talks with Israeli officials.

He was responding to comments by Russian Foreign Minister Sergei Lavrov suggesting that the text agreed in Berlin Tuesday does not foresee fresh sanctions and envisages direct talks with Tehran that would include the United States.

"This resolution builds on the last two resolutions in many of the same categories," Burns said, mentioning a travel ban on certain Iranian officials, freezing of assets of some institutions and a ban on exports of dual-use items.

He said a draft could be submitted to the full Council on Thursday or Friday, but would probably need a few weeks of discussion before it can be brought to a vote.

"We are confident that it will pass, we know it is the right step. Iran is flagrantly out of compliance with its Security Council obligations," Burns said.

On Wednesday, Iran dismissed as illegal and ineffective the threat of new UN sanctions and said it would clear up any remaining questions about its nuclear programme in talks with the Vienna-based UN watchdog agency.

After the head of the UN atomic watchdog agency, Mohamed El Baradei, visited Tehran in mid-January, Iran agreed to clear up all outstanding issues about its atomic drive within four weeks.

Diplomats now indicate that the grace period could stretch to six weeks.

China and Russia, which have lucrative trade and energy ties with the Islamic republic, have been reluctant to back tougher punitive measures.

The US administration's own intelligence on Iran has made it difficult to convince Beijing and Moscow that Tehran deserves biting sanctions.

A National Intelligence Estimate, the consensus view of 16 US spy agencies, released in early December reported that Iran abandoned its nuclear weapons programme in 2003, a conclusion that undermined President George W. Bush's warnings about the Iranian threat.

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