Russia had earlier insisted on its right to carry out the air defense contract. Its rethink underlined how the tolerance of non-Western big powers for Iran's disputed nuclear activity is fading, and could deny Iran formidable protection against any military attacks on its atomic installations.

Western intelligence indicates Iran is 1-3 years away from the capability to produce a nuclear weapon, giving the world some time to rein in its uranium enrichment program with sanctions, U.S. Defense Secretary Robert Gates said.

Parts of Iran's oil and gas industry could be targeted by an extra layer of European Union sanctions reaching substantially those approved by the U.N. Security Council on June 9, according to a document prepared for EU leaders.

Hardline Iranian leaders have greeted the Security Council's action with defiance and contempt, vowing to pursue an escalating enrichment program and review already tense relations with U.N. nuclear inspectors.

But the Kremlin shift on the S-300s, a deal first disclosed by Iran in 2007, pointed to Tehran's increased diplomatic isolation over its secretive campaign for nuclear capability.