Flying to the Middle East on Monday, Rice sought to tighten the screws on Tehran after taking the unprecedented step of sending a top US diplomat to meet Iran's chief negotiator Saeed Jalili at international talks in Geneva.
Until Saturday, the United States had refused to sit with Iran at such talks until it stopped enriching uranium, but changed course to show it was going the extra mile for a diplomatic solution.
The meeting sent a "very strong message to the Iranians that they can't go and stall … and that they have to make a decision," Rice told reporters on her flight to Abu Dhabi, capital of the United Arab Emirates (UAE).
"It clarifies Iran's choices and we will see what Iran does in two weeks. But I think the diplomatic process now has a kind of new energy in it," Rice said.
Iran's Jalili and EU foreign policy chief Javier Solana hailed their talks as "constructive" but Solana lamented that Tehran had not given a final response to proposed incentives for Tehran to abandon its nuclear programme.
For his part, Jalili insisted Monday that the issue of halting enrichment had not even been raised in the talks.
"The question of suspending enrichment was not discussed in Geneva, there were discussions on the different parties' approach to the continuation of the negotiations, their setting and their calendar," the official news agency IRNA quoted him as saying.
The six world powers have offered to start pre-negotiations during which Tehran would add no more uranium-enriching centrifuges and in return face no further sanctions — the so-called "freeze-for-freeze" approach.
The diplomacy offered the possibility of both negotiations and the "possibility of punitive measures," Rice said.
"And we are in the strongest possible position to demonstrate that if Iran doesn't act, then it's time to go back to that track."
She was referring to the New York track, where the UN Security Council has so far imposed three rounds of sanctions on Iran.
The top US diplomat did not expect any "imminent action" as August is a slow summer month at the Security Council but expected work to begin soon after on drafting another round of "punitive measures."
The showdown has stirred fears of Israeli or even US military strikes against Iran, as US President George W. Bush has insisted Washington would keep all options on the table. It has also sent oil prices spiralling upward.
Rice — who was heading to the UAE to discuss Iran, Iraq, Lebanon and the Middle East peace process — said Washington would also look at other unilateral steps it can take to squeeze Iran's financial institutions.
Rice said Undersecretary of State William Burns's presence in Geneva helped strengthen diplomacy involving the five permanent UN Security Council members — the United States, Russia, China, France and Britain — as well as Germany.
The United States has in the past met resistance for tougher sanctions from Russia and China, which have strong economic ties with Iran.
Rice also said Burns's presence appeared to be "a bit surprising to the Iranians" who were robbed of a chance to repeat past claims that the US absence at such talks showed Washington was not interested in a diplomatic solution.
Rice would not elaborate on prospects for setting up a US diplomatic presence in Iran for the first time since US-Iranian ties were severed in the wake of the Islamic revolution in 1979 and the seizure of US hostages.
But she said any effort to set up an "interests section" would focus on improving US contacts with the Iranian people.
"We have an interests section in Cuba, so I wouldn't read thawing of relations into anything," Rice said.
Rice said Burns would not return to talks with the Iranians in two weeks.
"We've done enough to demonstrate that the United States is serious and to assure our partners that we're serious and to assure the Iranians that we're serious," she said.
