By Parisa Hafezi and Fredrik Dahl

TEHRAN (Reuters) - Iran said on Tuesday that new sanctions imposed on it by the European Union over Tehran's disputed nuclear ambitions could hurt diplomatic efforts to resolve the long-running row.

The punitive measures agreed by the 27-nation EU on Monday target businesses and individuals the West alleges are linked to the Islamic Republic's nuclear and ballistic programs.

The latest sanctions include an asset freeze on Iran's largest state bank, Bank Melli, and visa bans on senior officials including Defence Minister Mostafa Mohammad Najjar and Gholamreza Aghazadeh, head of Iran's Atomic Energy Organisation.

Western powers suspect Iran, the world's fourth-largest oil exporter, wants to make nuclear arms but Tehran denies this.

Foreign Ministry spokesman Mohammad Ali Hosseini condemned the move by the EU, still an important economic partner for Tehran even if trade volumes have declined, as "illegal" and made clear it would not slow Iran's nuclear activities.

"Such illegal and paradoxical behavior .... is meaningless and is strongly condemned," the semi-official Fars News Agency quoted Hosseini as saying.

He said it would strengthen the determination of Iranians "to establish their obvious rights and will not help to create an appropriate atmosphere to resolve the issue through diplomatic channels."

Hosseini was referring to separate proposals put forward by Iran and by six world powers intended to defuse a dispute that has sparked fears of military confrontation and helped push up oil prices to record highs.

PACKAGE DIPLOMACY

EU foreign policy chief Javier Solana handed Iran an offer on June 14 of economic and other benefits proposed by the United States, Russia, China, Britain, Germany and France to try to convince it to halt sensitive uranium enrichment.

Iranian officials have repeatedly ruled out suspending enrichment, which can have both civilian and military uses.

Their refusal to do so has drawn three rounds of limited U.N. sanctions since 2006 and Western powers have warned of more such measures if Iran rejects the latest offer.

The Islamic Republic has put forward its own package of proposals aimed at resolving the row, but diplomats say it ignores global concern about its enrichment program.

Analysts say Western companies are becoming more wary of investing in Iran even though its windfall crude export earnings, which its oil minister estimates at $6 billion per month, are helping it to cushion the sanctions impact.

President Mahmoud Ahmadinejad, widely expected to stand for re-election in 2009, is also under increased political pressure at home for failing to rein in annual inflation of 25 percent.

The United States, which has also imposed sanctions on Iran beyond the U.N. resolutions, says it is focusing on diplomatic pressure to thwart Tehran's nuclear plans but has not ruled out military action as a last resort.

The New York Times on Friday quoted U.S. officials as saying Israel had carried out a large military exercise, apparently a rehearsal for a potential bombing of Iran's nuclear facilities.

(Reporting by Parisa Hafezi; Writing by Fredrik Dahl; Editing by Dominic Evans)

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