TEHRAN - Iran's showdown with the West slid closer to dangerous confrontation on Tuesday as international alarm over a new uranium enrichment plant and Tehran's death sentence for a "CIA spy" raised the stakes.

Both sides were digging in, with Iran's defiance hardening and the United States and European Union actively taking steps to fracture the Iranian economy through further sanctions.

China, which rejects sanctions, warned of disastrous consequences if the Iranian nuclear row escalated into conflict, while Japan said it was "very concerned."

The IAEA's confirmation on Monday that Iran had begun enriching uranium in a new, underground bunker southwest of Tehran was seized upon by the United States, Britain, France and Germany as an unacceptable "violation" of UN Security Council resolutions.

But Iran's envoy to the International Atomic Energy Agency (IAEA), Ali Asghar Soltanieh, on Tuesday shot back that the stance was "politically motivated". The underground Fordo plant had been revealed two years ago and documented, he said. The 20-percent enriched uranium it was to produce would be used for "peaceful and humanitarian" purposes, namely isotopes for cancer treatment, he said.

Both Solatanieh and the IAEA stressed that the UN nuclear watchdog had 24-hour cameras there and inspectors to keep it under watch. That seemed unlikely to reassure the United States, though, or its chief Middle East ally, Israel, analysts said.

"Israel, which has already warned Iran that it could take military action against installations, is very, very worried by this facility ... We are moving into dangerous territory," said Mark Hibbs of the Carnegie Endowment for International Peace.

But while Iran downplayed the significance of Fordo -- and affirmed it was ready to resume nuclear talks with world powers that collapsed a year ago -- it continues to send tough signals to its longtime foe, the United States.

On Monday, a Revolutionary Court in Tehran sentenced an American former Marine, Amir Mirzai Hekmati, to death after convicting him of being a CIA spy.

Iran, which last month put on display what it said was a CIA reconnaissance drone it claimed to have captured through cyberwarfare, has also been stepping up military exercises in a show of strength.

Its elite Revolutionary Guards have said they are about to launch new navy manoeuvres in the Strait of Hormuz, at the entrance of the Gulf. The navy drills are aimed at showing Iran can close the Strait of Hormuz, as political and military officials have warned, if the Islamic republic's oil exports are blocked or severely curtailed. China, which buys 20-22 percent of Iran's crude oil, warned on Tuesday against conflict.

US Treasury Secretary Timothy Geithner arrived in Beijing on Tuesday for talks focused on sanctions against Tehran as China warned of disastrous consequences if the Iranian nuclear row escalated. The sanctions, signed into law by President Barack Obama on December 31, intend to put further pressure on Iran, which Washington accuses of pursuing atomic weapons -- a claim denied by Tehran.

Geithner is expected to encounter stiff opposition in Beijing as Iran's showdown with the West slid closer to confrontation over its new uranium enrichment plant and Tehran's death sentence for a "CIA spy" raised the stakes.

"We urge all relevant nations to remain calm, exercise restraint, refrain from taking actions that will intensify the situation and make common efforts to prevent war," Chen Xiaodong, a top Chinese diplomat on Middle East affairs said in an online interview with the state press.

"Everyone knows that 40 percent of the oil shipped daily to every part of the world goes through the Strait of Hormuz, so once war starts in this region not only will the relevant nations be affected and attacked, it would also ... bring disaster to a world economy deep in crisis."

Chen reiterated China's rejection of the sanctions, which bar any foreign banks that do business with Iran's central bank -- responsible for processing most oil purchases in the Islamic republic -- from US financial markets.

Geithner will meet top Chinese leaders including Premier Wen Jiabao on Wednesday before heading on to Tokyo on Thursday, according to the US Treasury.

He will discuss "continued coordination with international partners in the region to increase pressure on the government of Iran, including financial measures targeting the central bank of Iran," it said in a statement.

The visit comes a day after the UN atomic watchdog said Iran had begun enriching uranium to up to 20 percent at a new plant in a fortified bunker sunk into a mountain, prompting alarm from Western powers.

But energy-hungry China -- which relies on Iran for 11 percent of its imported oil supplies -- has repeatedly said sanctions will not resolve the nuclear issue.

"If you look at it (new law) purely from the letter of the law, it really puts the US and China on a collision course," said Patrick Chovanec, associate professor at Beijing's Tsinghua University.

He said Geithner would use the visit to try to iron out differences with Beijing, which would prove a tough task.

"From a broader strategic perspective, China is very unlikely to accept the US dictating who they can buy oil from and under what conditions," he said.

An editorial published Tuesday in the state-run Global Times daily, known for its nationalist stance, said China should continue trading with Iran "despite pressure from the US and European countries."

"If Chinese companies are sanctioned by the US due to their legal trade with Iran, China should take countermeasures," the paper said.

Jia Qingguo, a professor at Peking University's American Studies Center, said China was still waiting to see whether the United States had "conclusive evidence" that Iran is developing nuclear weapons.

"If the United States asks other countries to impose joint sanctions against Iran only because it has tense ties with Iran, that's not reasonable," he said.

International sanctions, meanwhile, have left resource-poor Japan searching for alternative supplies, officials say, as Tokyo tries to respond to US and EU concerns over Iran.

Japan is heavily dependent on the Middle East for its energy, with Iranian oil accounting for nearly nine percent of its power needs in the first 11 months of 2011 -- an issue that Geithner is expected to discuss with Japanese leaders.

The treasury secretary will hold talks with Prime Minister Yoshihiko Noda and Finance Minister Jun Azumi in Tokyo on Thursday.