The White House said today the United States would seek further sanctions against Iran in response to an alleged plot to assassinate Saudi Arabia's ambassador to Washington.
"We're responding very concretely with actions we know will have an impact on Iran and will make clear this kind of behavior is unacceptable and will further isolate Iran," White House spokesman Jay Carney told reporters.
But he stopped of citing any specific measures under consideration, except to say that Washington was discussing the issue with "friends and allies around the world".
Saudi Arabia earlier said Iran would "pay the price" for the alleged plot, while Tehran called the accusation a fabrication designed to sow discord in the region.
US officials said the elaborate plot - which they compared to a film script - would justify pushing for a new round of UN sanctions against Iran.
Tehran said the allegations threaten stability in the Gulf - where Saudi Arabia and Iran, the biggest regional powers, are fierce rivals and Washington has a massive military presence.
Speaking in London, Saudi prince Turki al-Faisal, himself a former ambassador to Washington, said: "The burden of proof is overwhelming... and clearly shows official Iranian responsibility for this.
"Somebody in Iran will have to pay the price."
US vice pPresident Joe Biden told TV network ABC that Washington was working on a new round of international sanctions against Iran and "nothing has been taken off the table".
Ali Larijani, Iran's parliament speaker, said the "fabricated allegations" aimed to divert attention from revolts in the region and turn Muslim countries against each other.
"America wants to divert attention from problems it faces in the Middle East, but the Americans cannot stop the wave of Islamic awakening by using such excuses," Mr Larijani said.
"These claims are vulgar," he said in an open session of parliament. "We believe that our neighbours in the region are very well aware that America is using this story to ruin our relationship with Saudi Arabia."
US authorities said yesterday they had unmasked the plot by two Iranians linked to security agencies to assassinate Saudi Ambassador Adel al-Jubeir. One, Manssor Arbabsiar, was arrested last month while the other is believed to be in Iran.
At a news conference, FBI director Robert Mueller described a convoluted conspiracy involving monitored international calls, Mexican drug money and an attempt to blow up Jubeir, a confidante of King Abdullah.
"Though it reads like the pages of a Hollywood script, the impact would have been very real and many lives would have been lost," Mr Mueller said.
Some Iran experts were sceptical, saying they could not see the motive for such a plot. Iran has in the past assassinated its own dissidents abroad, but an attempt to kill an ambassador would be a highly unusual departure.
US court documents accuse Arbabsiar, a naturalised US citizen with an Iranian passport, of paying $100,000 to an informant, who had posed as an associate of a Mexican drug cartel but in fact worked for the US Drug Enforcement Agency and alerted the authorities to the plot.
Mr Arbabsiar made phone calls to Iran to the second suspect, Gholam Shakuri, described as a member of the Iranian Revolutionary Guards unit called the Quds Force.
"It strikes me that Iran and the Quds Force would not conduct a mission like this. It's possible but unlikely," said Dubai-based defence analyst Theodore Karasik.
"It doesn't fit the modus operandi of the Quds Force or Iranian intelligence services. If it was true, it would be one of the most botched operations of its kind."
Mainly Shi'ite Iran and Sunni-ruled Saudi Arabia are bitter regional rivals and see themselves as protectors of Islam's two main sects. Nevertheless, they maintain diplomatic ties and even signed a security agreement in 2001. Iranian president Mahmoud Ahmadinejad visited Riyadh in 2007.
The United States has led a global effort to isolate Iran and pile on UN sanctions over Tehran's nuclear programme, which Washington says aims to produce atomic weapons. Iran says it is only pursuing its right to develop peaceful nuclear power.
US diplomatic cables from Riyadh leaked by anti-secrecy group WikiLeaks over the past year show Riyadh repeatedly pushing the United States to take a tougher stance towards Iran, including possibly using military force.
Tensions rose between Riyadh and Tehran this year when Saudi Arabia sent troops to help Bahrain's Sunni leaders put down pro-democracy protests led by that country's Shi'ite majority.
This month Riyadh accused some among its own Shi'ite Muslim minority of conspiring with a foreign power - a clear reference to Iran - following street clashes in the Eastern Province.
But Iranian analyst Saaed Leylaz said it was hard to see why Tehran would risk involving itself in a plot like the one alleged in Washington.
"Killing the Saudi envoy in America has no benefit for Iran," he said. "The consequences are dangerous... It could cause military confrontation in 2012 between Iran and America."
A Western diplomat in Riyadh said the charges were likely to be discussed at the UN Security Council.
"The US and Saudi Arabia and other allies are discussing the possibility of taking this to the Security Council because this is an assault on a foreign diplomat in the US," he said.
US president Barack Obama, who seeks reelection next year, called the alleged conspiracy a "flagrant violation of US and international law". Secretary of state Hillary Clinton said she hoped countries hesitant to enforce existing sanctions on Iran would now "go the extra mile".
Iran also sought recourse in the world body. Its ambassador to the United Nations complained of US "warmongering" in a letter to secretary general Ban Ki-Moon.
"The US allegation is, obviously, a politically motivated move and a showcase of its long-standing animosity towards the Iranian nation," Mohammad Khazaee wrote.
The State Department issued a three-month worldwide travel alert for American citizens.
The alleged plot "may indicate a more aggressive focus by the Iranian government on terrorist activity against diplomats from certain countries, to include possible attacks in the United States," it said in a statement.
Kenneth Pollack, a former CIA and National Security Council analyst, said a plot against targets inside the US "would be a first for the Quds Force".
"I do want to hear more about what evidence [they] have."
Reuters