Obama, who addressed Iranians in a new videotaped appeal to mark the observance of Nowruz — a festival celebrating the arrival of spring — has pledged to pursue aggressive sanctions to prevent Iran from getting a nuclear weapon.
"We are working with the international community to hold the Iranian government accountable because they refuse to live up to their international obligations," Obama said in the address released by the White House.
"But our offer of comprehensive diplomatic contacts and dialogue stands."
Iran, which has refused to halt its uranium enrichment program, denies it is seeking to build a nuclear bomb and says its nuclear program is aimed at generating electricity.
During his first year in office, Obama marked Nowruz with an unprecedented message offering Iran a "new beginning" of diplomatic engagement with the United States.
But Tehran rebuffed the gesture and relations soured further when Iranian authorities cracked down on opposition protesters after a disputed election last June, drawing U.S. condemnation.
"Over the course of the last year, it is the Iranian government that has chosen to isolate itself, and to choose a self-defeating focus on the past over a commitment to build a better future," Obama said.
"We are familiar with your grievances from the past – we have our own grievances as well, but we are prepared to move forward. We know what you're against; now tell us what you're for," he said.
Obama said Washington was committed to a better future for Iranians despite U.S. differences with Tehran.
"Even as we continue to have differences with the Iranian government, we will sustain our commitment to a more hopeful future for the Iranian people," he said.
FOCUS ON PEOPLE, SANCTIONS
Obama said the United States was increasing opportunities for educational exchanges for Iranian students to study at U.S. colleges and universities as well as working to increase access to Internet technology so Iranians could "communicate with each other, and with the world, without fear of censorship."
Obama's openness to engaging diplomatically with Iran if it "unclenched its fist" broke with the previous administration's policy of seeking to isolate the Islamic Republic, which President George W. Bush branded part of an "axis of evil."
Obama has not ruled out any options in dealing with Iran, the world's fifth-largest crude oil exporter, but U.S. officials have made clear that their preferred option is diplomacy, given the difficulty of enforcing sanctions and the risk that military action could cause wider conflict.
Obama lamented Tehran's reaction to his offer of dialogue and reiterated the United States believed Iran had the right to "peaceful nuclear energy" if it met international obligations.
"You have refused good faith proposals from the international community," Obama said. "Faced with an extended hand, Iran's leaders have shown only a clenched fist."
The United States has agreed with Britain, France and Germany on a draft proposal for a fourth round of sanctions that would place new restrictions on Iranian banks and target the Revolutionary Guard and firms linked to it.
Washington has been struggling to win over China and Russia, both veto-wielding members of the U.N. Security Council and key allies of Iran, to agree to more aggressive sanctions.
In a development on Friday, Russian Prime Minister Vladimir Putin told visiting U.S. Secretary of State Hillary Clinton that Russian support for a new U.N. sanctions resolution was possible.
The United States, anxious not to undermine growing domestic opposition to President Mahmoud Ahmadinejad's government, has emphasized that any sanctions will be aimed at Iran's government, not its people.
"I want the Iranian people to know what my country stands for. The United States believes in the dignity of every human being, and an international order that bends the arc of history in the direction of justice," Obama said.
He said the United States wanted "a future where Iranians can exercise their rights, to participate fully in the global economy, and enrich the world through educational and cultural exchanges beyond Iran's borders. That is the future that we seek. That is what America is for."
(Editing by Doina Chiacu)
