NEW ORLEANS - The United States on Monday rejected claims by Prime Minister Benjamin Netanyahu that international sanctions are failing to halt Iran's nuclear program.

Prime Minister Benjamin Netanyahu told U.S. Vice President Joe Biden during their meeting in New Orleans on Sunday that sanctions have hurt Iran but are not stopping Iran's efforts to acquire nuclear weapons.

Netanyahu said that a credible threat of military action is the only way to ensure that Iran will rethink its nuclear program. According to Israeli estimates, the only time that Iran paused its nuclear program was in 2003, when Iran believed there was a threat of military action.

But the U.S. was quick to rebuff the call to use force against Iran, which has repeatedly denied Western accusations that its civilian nuclear program is a mask for designs on an atom bomb.

"I disagree that only a credible military threat can get Iran to take the action that it needs to end its nuclear weapons program," U.S. Defense Secretary Robert Gates said on Monday.

Sanctions against Iran were already beginning to bite, Gates told a news conference in Melbourne after security talks with Australia.

"We are prepared to do what is necessary. But at this point we continue to believe that the political, economic approach that we are taking is in fact having an impact in Iran."

Gates later told a small group of reporters that additional punitive measures by allies, beyond the UN sanctions, "have had considerable effect in terms of aggravating Iran's trade and financial operations".

However, Gates said that all options remained on the table.

"The president has said repeatedly that when it comes to Iran that all options are on the table and we are doing what we need to do to ensure that he has those options," he said.

Talks in Turkey?

Iranian Foreign Minister Manouchehr Mottaki has said Iran is ready to hold talks on its nuclear programme with major powers, and proposed that talks be held in Turkey.

"The Iranians have reached back out and said they would be willing to meet, but so far as I know there is no date or time for that meeting," U.S. Secretary of State Hillary Clinton told the same news conference, following talks in Australia.

"Certainly we have made it clear we would welcome a return to the negotiating table."

Israel's talk of a military threat has raised speculation that Netanyahu, who has rebuffed U.S. and international calls to reimpose a freeze on building in West Bank settlements, was trying to shift the focus of his visit away from the settlement stalemate.

But Netanyahu had made clear that Israel wanted to see if tough economic sanctions could eliminate what it has described as a threat against its existence.

Netanyahu is scheduled to meet Clinton in New York on Thursday for a fuller discussion on Israeli-Palestinian issues. Netanyahu will not see Obama, who is on a 10-day trip to Asia.

"Agreement or not, our commitment to your security is unconditional and complete," one of the Israeli sources quoted Biden as telling Netanyahu.

Biden said later the United States and Israel had a "critical strategic relationship" and it was "one in which we will not yield one single inch".

A 10-month moratorium on housing starts in West Bank settlements expired in late September, some three weeks after direct peace talks began in Washington. Clinton said on Thursday she was working nonstop to break the deadlock.

Diplomats said Washington had offered Israel a package of incentives, including ideas on security, to persuade Netanyahu to resume a partial settlement freeze for two months.

The proposals included U.S. backing for Netanyahu's demand for an Israeli military presence along the Jordan river, the likely eastern border of a future Palestinian state.

But Israeli leaders have balked at what the political sources said was the package's vague time frame for the troop deployment, which Palestinians oppose.

A top Palestinian official said last week the Palestinians would give the United States several more weeks to try to relaunch direct peace talks with Israel.

Netanyahu flies to New York on Monday after speaking to the Jewish Federations conference and will raise in a meeting with UN Secretary General Ban Ki-moon Israel's objection to any unilateral statehood moves at the United Nations by the Palestinians, an Israeli official said.