TEL AVIV (Reuters) - The latest report by U.N. inspectors has hardened suspicions that Iran is seeking nuclear arms capability, but Israeli experts have little confidence that international action will deny the Islamic Republic the means to make a bomb.

The pessimism sounded by academics, retired generals and statesmen on the consequences of last week's International Atomic Energy Agency (IAEA) findings contrasted with how Israel and the United States responded in public -- with pledges to use the report to rally support for stiffer sanctions against Iran.

Nor did the conference on Monday at Tel Aviv University's Institute for National Security Studies (INSS) hear confident predictions that Israel or its allies would attack Iran.

"Can this (IAEA) report create a new basis for increasing the pressure on Iran? There is no good reason for being optimistic," said Ephraim Kam, INSS deputy director and a former Israeli military intelligence colonel.

"Iran wants a bomb, or at least the capacity to make a bomb, and is willing to pay the price."

Iran denied the IAEA allegations that it appeared to have worked on designing an atomic bomb and may still be conducting secret research. Tehran says its nuclear program is peaceful, mainly to generate electricity to meet its growing energy needs.

Israel, widely thought to have the Middle East's only atomic arsenal, views Iran as the greatest threat to its existence.

Several speakers agreed that Tehran was unlikely to be deterred by more sanctions, even if these materialize from a divided U.N. Security Council amid fears of Iran's influence over oil markets at time of global economic turmoil.

Underlining the problems in getting a new U.N. resolution, Russian Foreign Minister Sergei Lavrov was quoted as saying on Monday that Moscow opposed tightening the screws on Iran.

"We consider the sanctions track on Iran to have been exhausted," Lavrov said, according to Interfax news agency.

W. Pal Sidhu of New York University's Center on International Cooperation told the Tel Aviv conference: "I think we have reached a limit in terms of sanctions," adding that Iran had "a complete (nuclear) fuel cycle that is unlikely to be stopped only with outside technical sanctions."

Sidhu said Iran's distant, dispersed and defended facilities "may well be a bridge too far" for Israel's armed forces and that the United States would be loath to launch its own preemptive strikes without Security Council approval.

Sidhu and Zvi Bar'el, a university lecturer and analyst for Israel's liberal Haaretz daily, saw in the faceoff with Iran a chance for dialogue -- perhaps on a long-proposed accord ridding the Middle East of weapons of mass destruction.

Israel and the United States have said a WMD-free zone would require full Iranian and Arab recognition of the Jewish state.


Robert Silverman, political counselor at the U.S. embassy, said neither Washington nor Israel had renounced the military option but that "clearly what we're talking about right now is ratcheting up sanctions and pressure through international engagement."

In Jerusalem, Israeli Foreign Minister Avigdor Lieberman sounded optimistic about the efficacy of punitive diplomacy.

"So far the international community has imposed sanctions on Iran only on 30 percent of areas where it could be possible," he told an Israeli parliamentary panel, according to a spokesman. "Even if the Western world would impose sanctions without China and Russia, it would be enough to strangle Iran."

Yet even such a Western expansion of sanctions might not be forthcoming without a "smoking gun" -- incontrovertible proof of Iran building a bomb, such as an announcement from Tehran, a controlled atomic blast or the expulsion of U.N. inspectors.

Ephraim Asculai, a 40-year veteran of the Israel Atomic Energy Commission and of the IAEA, said Iran might defy world scrutiny by pursuing "nuclear breakout" in secret or gathering all the components for a warhead without actually making it.

"The big problem is: would we know about it if Iran decided to break out and not tell anyone?" said Asculai, who estimated that the Iranians could have enough uranium for a nuclear device in a year, should they recalibrate their enrichment centrifuges.

While Israel welcomed the IAEA report, some of its officials groused at what they called the slow work of the Vienna-based agency, even as Iran forges on with sensitive nuclear work.

"In their cautious way they would probably send more inspectors to check and recheck," Asculai said. "And meanwhile the Iranians would accomplish a lot."

Kam said he believed Israel could manage a unilateral strike on "three or four" Iranian nuclear sites, but described this as unlikely given its reliance on its strategic U.S. ally.

President Barack Obama's administration, trying to extract troops from Iraq and Afghanistan, is wary of starting another war in the Muslim world.

"If the Americans will not give Israel a green light, or at least what we call a 'yellow light', then Israel will not be able to attack," Kam said.

Giora Eiland, a former Israeli general and national security adviser, said Prime Minister Benjamin Netanyahu's government had "a year, maybe two" to decide, given Iran's nuclear progress.

"And if you don't make a decision, you make a decision" to leave Iran to its course, Eiland said. "Two terrible choices. I believe the international community will fail to reach a solution on the Iranian case, so such a dilemma will be real."

For now, those seeking to hobble, if not halt, Iran may have to make do with covert attacks such as cyberwarfare or sabotage.

"Will these things be accorded new legitimacy in light of the difficulty of nuclear diplomacy through negotiations?" said INSS arms control expert Emily Landau.

Mochila insert follows.