By Paul Reynolds
World affairs correspondent, BBC News website
The Iranian failure to suspend the enrichment of uranium as demanded by the UN Security Council has set the stage for the next move in this long-running confrontation - possible sanctions.
Iran insists its nuclear work is for peaceful purposes
However, diplomatic arguments lie ahead because American and European pressure will probably be countered by Russian and Chinese reluctance.
So there is some way to go before the Council makes any decision.
The Iranian disregard of Security Council resolution 1696, that it suspends enrichment and carry out other confidence-building measures by 31 August, was confirmed in a report by the UN's nuclear agency the International Atomic Energy Agency (IAEA) which was seen by the media in Vienna, the IAEA's headquarters.
The report said: "Iran has not suspended its enrichment related activities."
And beyond that, the report said, Iran had been blocking IAEA inspectors.
Ahmadinejad says Iran will not be intimidated
This came as no surprise. The Iranian President Mahmoud Ahmadinejad was quoted by Iranian radio as saying only hours before the deadline: "The Iranian nation will never abandon its obvious right to peaceful nuclear technology."
The Security Council had called for the suspension to clear the way for talks about concessions over trade that would include the transfer to Iran of nuclear technology to make electricity.
Iran responded that it was ready for "serious talks" but would not suspend its programme in advance.
What happens now is that the US will consult in the first instance with the so-called EU3 - Britain, France and Germany, which led earlier, fruitless, negotiations with Iran.
If agreement is reached among these countries, then Moscow and Beijing will be brought in to try to get them on board.
And that is where the difficulty lies.
Loss of confidence
Neither Russia nor China is keen on sanctions, especially sanctions that might make a major impact on Iran where they both have important interests. China has signed up to buy oil from Iran.
So, the first sanctions proposed by the US might be easy ones - travel and financial restrictions on Iranians involved in the nuclear programme.
A more serious one would be a ban on the transfer of nuclear technology or equipment and possibly a similar ban on material for Iran's missile development.
Iran hid its nuclear programme for 18 years
So-called dual use items might also be prohibited.
The example here would be a Security Council resolution banning such exports to North Korea, which has actually left the Nuclear Non-Proliferation Treaty (NPT) and has declared that it has built a nuclear bomb.
If China and Russia refuse any sanctions, or serious ones, then the US would move to the further stage of trying to build a 'coalition of the willing' to try to hit Iran harder.
The US already itself imposes sanctions against Iran, especially against any co-operation with its oil and gas industry, and Washington might eventually propose that Europe joins it. But that is down the track.
In the meantime, Iran will no doubt continue its enrichment activities, though they are at an early stage.
And Iran will continue to insist on its rights under the NPT to enrich uranium for peaceful purposes.
The problem for the West is that Iran hid an enrichment programme for 18 years and as a result has lost the confidence of the IAEA that its enrichment will always be peaceful.
The fear is that it could in due course use the skills its acquires to make a nuclear device, though its says repeatedly that it has no such intention.
The issue of an attack on Iran has not gone away, though it is on the back burner for the moment.