By Jeff Mason
WASHINGTON (Reuters) - President Barack Obama on Saturday defended an interim deal with Iran to curb its nuclear program and, seeking to reassure Israel, pledged to step up sanctions or prepare for a potential military strike if Tehran fails to abide by the pact.
U.S. relations with Israel have been strained by the interim agreement, reached between Iran and major world powers including the United States, which was designed to halt advances in Iran's nuclear program and buy time for negotiations on a final settlement.
The United States says the agreement will give the international community time to see if Tehran is serious about curbing its nuclear ambitions, while providing some relief from sanctions that have crippled its economy.
Israel believes any sanctions relief is a dangerous gift to a country that threatens its very existence, and Israeli Prime Minister Benjamin Netanyahu has called the deal reached in Geneva a "historic mistake."
Obama, speaking at forum hosted by Haim Saban, a major political donor, made a point of referring to Netanyahu as "my friend Bibi," while acknowledging they occasionally had "significant tactical" disagreements.
Obama said the interim deal, negotiated with Iran by the United States, China, Russia, Britain, France and Germany, would provide space for a longer-ranging agreement to curb Iran's nuclear ambitions, which Tehran says are peaceful.
The president said he viewed the likelihood of a satisfactory "end state" as a 50/50 proposition, and repeated that all options remained on the table if Iran did not follow through with its obligations.
"If we cannot get the kind of comprehensive end state that satisfies us and the world community ... then the pressure that we've been applying on them and the options that I have made clear I can avail myself of, including a military option, is one that we would consider and prepare for," he said.
Obama said it was unrealistic to believe that Iran would halt and dismantle its nuclear program if the sanctions regime were strengthened and talks were not given a chance to succeed.
"One can envision an ideal world in which Iran said, 'We'll destroy every element and facility and you name it, it's all gone.' I can envision a world which Congress passed every one of my bills that I put forward. I mean, there are a lot of things that I can envision that would be wonderful," he said to laughter from the audience.
"But precisely because we don't trust the nature of the Iranian regime, I think that we have to be more realistic and ask ourselves: What puts us in a strong position to assure ourselves that Iran's not having a nuclear weapon ... what is required to accomplish that and how does that compare to other options that we might take?"
BACK AND FORTH WITH ISRAEL
Israeli Strategic Affairs Minister Yuval Steinitz, in reaction to Obama's remarks, said the two countries needed to resolve their differences on the issue.
"It must be made clear: In the final agreement, Iran must not have the capability to produce nuclear weapons. In order to ensure this, Iran must not have any capability to enrich uranium or to produce plutonium," Steinitz said.
Obama suggested any enrichment capacity left in Iran would be limited.
"It is my strong belief that we can envision an end state that gives us an assurance that even if they have some modest enrichment capability, it is so constrained and the inspections are so intrusive that they, as a practical matter, do not have breakout capacity," he said.
The United States says it will confer closely with Israel about crafting a permanent Iran agreement after the six-month confidence-building period laid out by the Geneva deal.
While pursuing that path, Washington has sought to reinforce its commitment to protecting Israel.
"We will not abide by any threats to our friends and allies in the region, and we've made that perfectly clear. And our commitment to Israel's security is sacrosanct," Obama said.
Secretary of State John Kerry, who spoke at the forum later in the day, said disagreements with Iran would continue on issues including Tehran's support for Lebanese Hezbollah, which the United States deems a "terrorist" group, and for Syrian President Bashar al-Assad.
"A comprehensive (nuclear) agreement wouldn't solve all our problems with Iran," Kerry said. "Whatever the outcome of the upcoming negotiations, Iran will still have much work to do."
MIDDLE EAST PEACE
Although the discussion at the Washington-based Brookings Institution focused primarily on Iran, Obama also touched on the Middle East peace process aimed at ending conflict between Israelis and Palestinians.
Israeli and Palestinian officials resumed U.S.-brokered peace talks on July 29 after a nearly three-year hiatus. At the time, Kerry said the aim was to reach "a final status agreement over the course of the next nine months."
That in effect set the end of April 2014 as a deadline, although U.S. officials have said that was not hard and fast.
"I think it is possible over the next several months to arrive at a framework that does not address every single detail but gets us to a point where everybody recognizes (it's) better to move forward than move backwards," Obama said.
In their remarks, both Obama and Kerry made clear that if a framework agreement were reached next year, there would still be more work to do.
Noting that he returned from his eighth trip this year to Israel and the Palestinian territories on Friday night, Kerry said wryly: "Now I am not a masochist. I am undertaking this because I believe in the possibilities."
Obama said the outlines of a potential peace agreement were clear and he left the door open for a pact that excluded the Gaza Strip, which is now controlled by Hamas Islamists opposed to peace moves by Palestinian President Mahmoud Abbas, who controls the West Bank.
"If there is a model where young Palestinians in Gaza are looking and seeing that in the West Bank, Palestinians are able to live in dignity ... that's something that the young people of Gaza are going to want," Obama said.
(Additional reporting by Arshad Mohammed, Elvina Nawaguna, and Ori Lewis; Editing by Christopher Wilson and Peter Cooney)