The West suspects Iran is working to build a nuclear bomb and the sanctions are meant to strip Tehran of revenue by shutting down financial deals with Iran's powerful state oil and tanker enterprises. Iran has said its nuclear program is for civilian purposes.

The House of Representatives passed its version of the bill in December and now the Senate and House must work out their differences in the legislation.

"This bill is another tool that will demonstrate to Iran that the United States is not backing down," Robert Menendez, the Democratic senator who helped craft the legislation, said on the Senate floor.

"Today the US Senate put Iranian leaders on notice that they must halt all uranium enrichment activities or face another round of economic sanctions from the United States," said Republican Senator Mark Kirk, a co-author of the bill, in a statement.

New measures against oil industry build on banking sanctions

The new sanctions build on penalties signed into law by US President Barack Obama in December against foreign institutions trading with Iran's central bank. Those sanctions already have cut deeply into Iran's oil trade.

The new package would extend sanctions to cover dealings with the National Iranian Oil Co and National Iranian Tanker Co, aiming to close a potential loophole that could have allowed Tehran, the world's third-largest petroleum exporter, to continue selling some of its oil.

The cumulative impact of US sanctions will be severe, said Suzanne Maloney, a senior fellow at the Brookings Institution's Saban Center for Middle East Policy.

"Right now, both sides are playing a game of chicken - the Iranians want to see how much they can get and how little they can give, whereas Washington and its allies are counting on the looming threat of impending sanctions to elicit more concessions on the part of Tehran," Maloney said.

But a former CIA analyst for the Near East and Persian Gulf region said the sanctions could be counterproductive ahead of the Baghdad talks on Iran's nuclear program by making Tehran think that the West is less interested in a deal than in undermining the regime.

"The biggest requirement now for getting an agreement is not to pile on still more sanctions, but instead to persuade the Iranians that if they make concessions the sanctions will be eased," said Paul Pillar, now a security studies professor at Georgetown University.

The Senate bill was brought up on Thursday but was blocked by Republicans who wanted some parts toughened up. Senator John McCain said the revised bill shows "we need a comprehensive policy" to include economic sanctions, diplomacy, military planning capabilities and options.

Senate Republican Leader Mitch McConnell said the revisions show Iran "that all options are on the table, in order to prevent any contrary perception that silence on the use of force would have created."