Britain has proposed new UN sanctions that would deny Iran's airlines and ships landing and transit rights. The confidential draft obtained by Reuters also says two more of the country's banks could have their assets frozen.

It comes as the International Atomic Energy Agency said Iran is ready to compromise on its nuclear programme. The statement comes after the meeting between the agency's director Mohamed ElBaradei and Iran's chief negotiator Ali Larijani.

It was agreed that a plan would be drawn up within two months on how to resolve questions about Tehran's nuclear activities.  

A new round of talks between Mr Larijani and EU foreign policy chief Javier Solana will begin in Lisbon on Saturday. They are seen as a last chance to overcome Iran's nuclear defiance before world powers bring in tougher sanctions.