Choosing words over warfare, the Security Council called Iraq's refusal to allow arms inspections "totally unacceptable" but dangled the possibility of U.N. concessions if Saddam Hussein cooperated.

The 15-member council on Thursday condemned Iraq's decision to snub weapons chief Richard Butler, but did not disclose what it planned to do about it, except to build a more effective dialogue with Iraq."The Security Council called the Iraqi action totally unacceptable," said the council's current president, Ambassador Danilo Turk of Slovenia.

President Clinton echoed that, but said Thursday the United States will "stop any and all efforts" to ease sanctions against Iraq if it persists in challenges of U.N. weapons inspectors. He did not elaborate on what actions the United States could take.

Iraq's actions contradict an agreement Secretary-General Kofi Annan struck with Saddam in February, the last time Iraq blocked the weapons inspectors from carrying out their searches, the council said. The deal averted an attack by the United States and Britain, which had sent forces to the Persian Gulf to back their insistence on inspections.

This time, however, there seemed to be little appetite for a fight: the Security Council's plea for increased dialogue received unanimous approval. The council even hinted it may ease sanctions, saying it "intends to respond favorably to future progress."

"I believe the Iraqi position on this issue is not a closed one," said Annan, who consulted with Iraqi Deputy Prime Minister Tariq Aziz before attending the council session. "It might be helpful to engage the Iraqis much more closely than we have," he said.

Even U.S. Ambassador Bill Richardson backed the coordinated Security Council effort.

"We are acting in consultation with the U.N. Security Council," he said. "This is not a battle between the United States and Iraq."

Talks with Iraq broke down Monday, when Butler refused to supply a certification that Iraq has destroyed all of its weapons of mass destruction - chemical and biological weapons and long-range missiles.

Iraq told weapons inspectors Thursday that they cannot check new sites. It also banned surprise inspections by the U.N. nuclear agency.

One option may be to consider proposals by some members, notably Russia and France, to alleviate some sanctions. Russia and France have pending financial interests in Iraq.