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Secretary of State Hillary Clinton vowed Monday that the Obama administration will not accept a nuclear armed Iran and is working on sanctions that will bite to press it to come clean about its suspected atomic program.

In a speech to pro-Israel lobby AIPAC, Clinton said parts of Iran's government are a menace to the Iranian people and the Middle East.

Iran's leaders must know there are real consequences for not proving their nuclear activities are peaceful, Clinton said.

"Our aim is not incremental sanctions, but sanctions that will bite," Clinton told the American Israel Public Affairs Committee.

"Let me be very clear: The United States is determined to prevent Iran from acquiring nuclear weapons," she said.

Despite fears that a recent spat between Israel and the U.S. over settlements would provoke a hostile reception, Clinton received a warm response from her mostly Jewish audience, which reserved its loudest applause for Clinton's declaration of a tough stance on Iran.

"She was fantastic", said Nancy Moornes, a conference delegate from Los Angeles. "Last week we had a little setback, but I think Netanyahu will explain it fully".

Prime Minister Benjamin Netanyahu arrived in Washington on Monday afternoon hoping to repair frayed ties with U.S. President Barack Obama, who was angered by Israel plans for Jewish homes in east Jerusalem, announced two weeks ago.

Netanyahu will also speak to delegates at the conference sponsored by the pro-Israel lobby AIPAC, several hours after Clinton's address.

Clinton said that if Iran developed a nuclear weapon, it would embolden terrorists and spark an arms race that would destabilize the Middle East.

"This is unacceptable. It is unacceptable to the United States. It is unacceptable to Israel. It is unacceptable to the region and the international community."

Israel and the West accuse Iran of building a nuclear bomb, a charge it denies.

Veto-wielding China has so far scuttled the administration's plans for quick action by the UN. But Clinton allowed that building support for new sanctions was taking time but said it was worth the wait.

"It is taking time to produce these sanctions, and we believe that time is a worthwhile investment for winning the broadest possible support for our efforts," she said.

"That will show Iran's leaders that there are real consequences for their intransigence, that the only choice is to live up to their international obligations," Clinton said.

Clinton also took aim at Iranian hard-liners who have clamped down hard on opposition supporters following disputed elections last year.

"Elements in Iran's government have become a menace, both to their own people and in the region," she said, referring to the crackdown.

Her comments came a day after Iran's supreme leader Ayatollah Ali Khamenei denounced the United States, accusing it of plotting to overthrow its clerical leadership, in a chilly response to Obama's latest overture for better cultural ties with Iran.

Ayatollah Ali Khamenei did not outright reject Obama's offer, conveyed in a video message to the Iranian people, but the supreme leader said that so far, Washington's offers of engagement with Tehran have been a deception.

Clinton also devoted much of her address to the stagnated peace process between Israel and the Palestinians, saying that renewed talks should be serious and substantive, and warning that new Israeli settlements in east Jerusalem and the West Bank were undermining U.S. mediation.

"New construction in East Jerusalem or the West Bank undermines mutual trust and endangers the proximity talks that are the first step toward the full negotiations that both sides want and need," Clinton said in a speech to AIPAC, an influential pro-Israel lobby group, at its annual conference in Washington.

The secretary of state added that Israel faces "difficult but necessary choices" on the road to Mideast peace because the status quo with the Palestinians was unsustainable.

Clinton stressed Washington's view that "the dynamics of demography, ideology, and technology" would eventually force political change in the region.

"There is another path. A path that leads toward security and prosperity for all the people in the region. It will require all parties - including Israel - to make difficult but necessary choices," she said.

Clinton told AIPAC delegates that the United States would continue to demand that Hamas, the Islamist Palestinian group that controls the Gaza Strip, renounce violence and recognize Israel. She also repeated U.S. calls for the release of captured Israeli soldier Gilad Shalit.

She also said the United States would continue to press for direct negotiations that could lead to a two-state solution for Israel and the Palestinians, with U.S. Mideast peace envoy George Mitchell's efforts to start indirect "proximity" negotiations as an essential foundation.

"These proximity talks are a hopeful first step, and they should be serious and substantive. Ultimately, of course, it will take direct negotiations to work through all the issues and end the conflict," she said.