By Lesley Wroughton and Parisa Hafezi
WASHINGTON/ANKARA (Reuters) - The United States on Monday demanded Iran make sweeping changes -- from dropping its nuclear program to pulling out of the Syrian civil war -- or face severe economic sanctions as the Trump administration hardened its approach to Tehran.
Iran dismissed Washington's ultimatum and one senior Iranian official said it showed the United States is seeking "regime change" in Iran.
Weeks after President Donald Trump pulled out of an international nuclear deal with Iran, his administration threatened to impose "the strongest sanctions in history," and vowed to "crush" Iranian operatives abroad, setting Washington and Tehran further on a course of confrontation.
U.S. Secretary of State Mike Pompeo demanded sweeping changes that would force Iran effectively to reverse the recent spread of its military and political influence through the Middle East to the shores of the Mediterranean Sea.
The speech added to the tension between the two countries, which grew notably when Trump this month withdrew from the 2015 international agreement aimed at preventing Tehran from obtaining a nuclear weapon.
If Washington sees tangible shifts in Iran's policies, it is prepared to lift sanctions, Pompeo said.
"The sting of sanctions will only grow more painful if the regime does not change course from the unacceptable and unproductive path it has chosen for itself and the people of Iran," Pompeo said in his first major speech since becoming secretary of state.
"These will be the strongest sanctions in history by the time we are done," he added.
The European Union largely dismissed Pompeo's speech and said it remained committed to the full implementation of the nuclear deal.
Pompeo took aim at Iran's policy of expansion in the Middle East through support for armed groups in countries such as Syria, Lebanon and Yemen.
He warned that the United States would "crush" Iranian operatives and proxies abroad and told Tehran to pull out forces under its command from the Syrian civil war where they have helped President Bashar al-Assad gain the upper hand.
Iran's president summarily dismissed Pompeo's demands.
"Who are you to decide for Iran and the world?," the semi-official ILNA news agency quoted Hassan Rouhani as saying.
"The world today does not accept America to decide for the world, as countries are independent ... that era is over ... We will continue our path with the support of our nation."
A senior Iranian official said Pompeo's remarks showed that the United States was pushing for "regime change," a charged phrase often associated with the U.S. invasion of Iraq in 2003 and the overthrow of President Saddam Hussein.
Pompeo warned that if Iran fully resumed its nuclear program Washington would be ready to respond and said the administration would hold companies doing prohibited business in Iran to account.
"Our demands on Iran are not unreasonable: give up your program," Pompeo said, "Should they choose to go back, should they begin to enrich, we are fully prepared to respond to that as well," he said, declining to elaborate.
Pompeo said Washington would work with the Defense Department and allies to counter Iran in the cyberspace and maritime areas.
The Pentagon said it would take all necessary steps to confront Iranian behavior in the region and was assessing whether that could include new actions or doubling down on current ones.
Pompeo will have an uphill battle convincing European allies to sign on to the administration's "Plan B" on Iran after its withdrawal from the nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA).
"Secretary Pompeo’s speech has not demonstrated how walking away from the JCPOA has made or will make the region safer from the threat of nuclear proliferation or how it puts us in a better position to influence Iran’s conduct in areas outside the scope of JCPOA. There is no alternative to the JCPOA," the EU said in a statement.
Pompeo said if Iran made major changes, the United States was prepared to ease sanctions, re-establish full diplomatic and commercial relations and support the country's re-integration into the international economic system.
Any new U.S. sanctions will raise the cost of trade for Iran and are expected to further deter Western companies from investing there, giving hardliners, including the Islamic Revolutionary Guard Corps, an opportunity to cement their grip on power.
Iran's ruling elite are mindful of recent protests sparked by economic hardship, which is, in part, their calculation for working with the Europeans on ways to salvage the nuclear deal.
Pompeo's speech did not explicitly call for regime change but he repeatedly urged the Iranian people not to put up with their leaders, specifically naming Rouhani and Foreign Minister Mohammad Javad Zarif.
"At the end of the day the Iranian people will get to make a choice about their leadership," Pompeo said.
Suzanne Maloney, deputy director of the Brooking Institution think tank's foreign policy program, said Pompeo's speech did indeed amount to a strategy of regime change.
"There is only one way to read it and that is that Trump administration has wedded itself to a regime-change strategy to Iran, one that is likely to alienate our allies. One with dubious prospects for success," she said.
The administration's approach "explicitly puts the onus on the Iranian people to change their leadership or face cataclysmic financial pressure," said Maloney who has advised the State Department on Iran in the Bush administration between 2005-2007.
Lebanese analyst Ghaleb Kandil, who has close ties to the pro-Iran Hezbollah group, said Washington's demands have previously not worked.
"These are conditions that were tested in previous phases of American pressures, before the nuclear deal, when Iran was in more difficult circumstances than it is in these days, and it did not surrender to these conditions or accept them," said Kandil.
Pompeo outlined 12 U.S. demands for Iran including to stop uranium enrichment, never to pursue plutonium reprocessing and to close its heavy water reactor.
It also had to declare all previous military dimensions of its nuclear program and to permanently and verifiably abandon such work, he said.
Pompeo's demand that Tehran stop uranium enrichment goes even further than the nuclear deal. Iran says its nuclear work has medical uses and will produce energy to meet domestic demand and complement its oil reserves.
Washington's regional allies, the Gulf Arabs and Israel, who were strong critics of the deal, praised the administration's position on Monday.
European parties to the nuclear deal - France, Britain and Germany - are working to find a way to keep the nuclear pact in effect after Washington's exit.
(Reporting by Lesley Wroughton and Parisa Hafezi; Writing by Lesley Wroughton and Yara Bayoumy; Additional reporting by Parisa Hafezi in Ankara, Jonathan Landay and Idrees Ali in Washington, Laila Bassam in Beirut, Ari Rabinovitch in Jerusalem, Dubai newsroom, Francois Murphy and Alastair Macdonald in Brussels; Editing by Yara Bayoumy and Alistair Bell)