Canberra: The world must toughen sanctions against Iran as its moves toward becoming a nuclear power, a US government expert on weapons proliferation said Monday.

Principal Deputy Assistant Secretary of State Patricia McNerney had her first discussions with the new Australian government Monday on nuclear proliferation threats posed by countries such as Iran and North Korea.

She said international sanctions were already having an impact on Iran, although Tehran had yet to abandon its nuclear ambitions.

"There is that psychological sense of isolation and there is an impact that's happening," McNerney told reporters in the Australian capital, Canberra, of sanctions.

"Unfortunately, these things tend to take time and I'm not sure that time is on our side, so we've got to think about how to increase that pressure," she said. "The Australian government is looking at some additional measures that they could take. We also will continue looking at additional measures the United States can take."

McNerney said the United States believes Iran could have nuclear weapons as early as next year. Iran says its atomic program is aimed at using nuclear reactors to generate electricity.

The European Union last week froze the assets of Iran's largest bank over Tehran's refusal to back off uranium enrichment.

Iran has yet to formally respond to a package of trade and economic incentives to make a deal. The offers were made June 14 by the five permanent UN Security Council members plus Germany.

Iran's official IRNA news agency reported Sunday that the country is reviewing the package of trade and economic incentives.

Prime Minister Kevin Rudd's government, which was elected in November last year, plans to examine how the Nuclear Nonproliferation Treaty can be altered so that countries including Iran, North Korea and India will join.

Rudd is establishing an international commission to recommend changes to the Nuclear Nonproliferation Treaty at the end of 2009.

The commission's chairman, former Australian foreign minister Gareth Evans, said early in June the treaty might need to be replaced with a new pact that has more support.

McNerney said while the United States wanted to be represented on Evan's commission, she ruled out replacing the treaty, which was established in 1980 to prevent the spread of nuclear weapons and technology and to further the
goal of nuclear disarmament.

"The US position is that the NPT is the cornerstone of our nonproliferation policy. We need to keep the NPT and strengthen it," she said.

"We wouldn't support trying to find an alternative because we think it would not be a viable, practical solution to today's challenges."