VIENNA (Reuters) - Major powers believe sanctions and setbacks to Irans nuclear program may have strengthened their hand before talks with a still-defiant Tehran, but chances of real progress at this weeks meeting in Istanbul look slim. Tougher punitive measures over the last year and possible sabotage aimed at slowing Irans nuclear drive could help buy more time for diplomacy and reduce the risk of the long-running row escalating into a military conflict, at least for now. Signaling determination to keep up the pressure, US Secretary of State Hillary Clinton told television network ABC the Obama administration may propose new unilateral sanctions on Iran, one of the worlds largest oil exporters. Also on Wednesday, Switzerland said it was tightening its sanctions with steps aimed at preventing it from being used by Tehran to get goods it could not buy elsewhere. But the Islamic Republics hardline leaders, who use the nuclear dispute to rally nationalist support at home and distract from the countrys economic problems, are showing no sign such measures will make them change course. We will not retreat one iota from our nuclear rights ... but we are ready for cooperation based upon justice and respect, President Mahmoud Ahmadinejad said in a speech. Even if Iran may be experiencing technical difficulties, diplomats and experts stress that it is still amassing enriched uranium, material which can be used to make bombs if refined further, and has repeatedly refused to halt such activity. As a result, expectations are low ahead of a second round of negotiations between Iran and six world powers in the Turkish city on January 21-22. The powers talking to Iran through European Union foreign policy chief Catherine Ashton are the United States, Britain, France, Russia, China and Germany. Agreeing to meet again was the only tangible result of the two sides resumption of dialogue in Geneva in early December after an interruption lasting more than a year. The powers will this time seek to test Irans readiness to start addressing their concerns about its nuclear plans, possibly by exploring ways to restore badly-bruised confidence, such as a plan to swap nuclear fuel which stalled a year ago. We are looking forward to getting into practical issues in Istanbul, a senior EU official said. The powers want Iran to ultimately agree to curb activity they suspect is aimed at developing nuclear weapons capability, offering economic and other incentives in return. Iran, which boasts its uranium enrichment work is progressing strongly despite Western attempts to set it back, says it only aims to generate electricity. I neither anticipate a breakthrough nor do I regard the upcoming session as the 'last chance, Greg Thielmann, a senior fellow at the Washington-based Arms Control Association, said. Arriving at a satisfactory agreement will take months and will involve many frustrations and setbacks, he said. Western officials say harsher sanctions on Iran, including steps targeting the oil and gas sectors, are hurting its economy and causing problems for its enrichment activities. Covert operations by Israel or the United States may also have damaged Irans nuclear program. Security experts have speculated the Stuxnet computer worm targeted the countrys Natanz enrichment site. Irans centrifuges producing enriched uranium, which can be used to fuel power plants or provide material for bombs if refined much further, have been plagued by breakdowns since a rapid expansion of the process in 2007-08. US intelligence agencies believe Iranian leaders have not yet decided to build a nuclear bomb, and some officials say problems affecting Tehrans nuclear equipment and personnel have set back its nuclear program by two years. There seems to be no real urgency for a diplomatic breakthrough after statements by US and Israeli officials that Irans enrichment program has been slowed down, nuclear expert Ivanka Barzashka at the Federation of American Scientists said. Israel sees Irans nuclear plans as a threat and it and the United States have not ruled out military action if diplomacy fails to resolve the dispute, even though US Defence Secretary Robert Gates has argued against it. In the run-up to the Istanbul meeting, Iran has dismissed any suggestions its nuclear work is facing problems and it says it will not even discuss its uranium enrichment program. It has indicated willingness to discuss the fuel swap plan again, which the West sees as a possible confidence-building step for broader nuclear talks, but the two sides remain far apart on how to implement it. Iran may be motivated more than ever to develop the nuclear program, especially since the ruling elite believe that backing down would send precisely the wrong signal to the United States and its allies, Alireza Nader, an Iran specialist at the RAND Corporation think tank, said.