(Adds sanctions expert's comment, paragraphs 5-6, U.N. Security Council meets, paragraph 10)
* Sanctions target Iran's Ayatollah Ali Khamenei -Trump
* Aimed at denying Iranian leadership access to financial system
* No talks while under U.S. sanctions -Iranian ambassador to U.N.
* U.S. building coalition on Gulf maritime security
* Europeans issue warning to Iran on 2015 nuclear pact commitments
By Steve Holland and Stephen Kalin
WASHINGTON/RIYADH, June 24 (Reuters) - U.S. President Donald Trump targeted Iranian Supreme Leader Ayatollah Ali Khamenei and other top Iranian officials with sanctions on Monday, taking a dramatic, unprecedented step to increase pressure on Iran after Tehran's downing of an unmanned American drone.
With tensions running high between the two countries, Trump signed an executive order imposing the sanctions, which U.S. Treasury Secretary Steven Mnuchin said would lock billions of dollars more in Iranian assets.
Trump told reporters the sanctions were in part a response to last week's downing of a U.S. drone by Iran, but would have happened anyway. He said Khamenei was ultimately responsible for what Trump called "the hostile conduct of the regime" in the Middle East.
Trump said the sanctions "will deny the Supreme Leader and the Supreme Leader's office, and those closely affiliated with him and the office, access to key financial resources and support."
John Smith, who was director of the U.S. Treasury’s Office of Foreign Assets Control (OFAC) before joining a law firm last year, said the United States had never targeted an Iranian head of state before and that was a sign Trump was getting personal.
"Generally, when you target a head of state you’re not turning back. That is when you believe all options are at an end," Smith told Reuters.
Some policy analysts say earlier sanctions issued under Trump's "maximum pressure" campaign are why Iran has felt compelled to adopt more aggressive tactics as its economy feels the crunch. The Trump administration wants to force Tehran to open talks on its nuclear and missile programmes and its activities in the region.
Iran would not accept talks with the United States while it is under the threat of sanctions, Iranian ambassador to the United Nations, Majid Takht Ravanchi, told reporters at the U.N.
The U.S. decision is another indication it "has no respect for international law and order," he said.
The U.N. Security Council met behind closed doors on Monday at the request of the United States, whose acting ambassador Jonathan Cohen said evidence showed Iran was to blame for attacks on commercial tankers in the Gulf in May and June and urged the world to tell Tehran its actions were unacceptable.
Iran's Foreign Minister Mohammad Javad Zarif, responding to the sanctions in a Twitter post, said hawkish politicians close to Trump "despise diplomacy, and thirst for war." Last year, Trump withdrew the United States from a 2015 international accord to restrict Tehran's pathway to a nuclear bomb and has since been ramping up sanctions to throttle the Iranian economy.
Mnuchin said Zarif would be targeted with U.S. sanctions later this week.
The latest sanctions are aimed at denying Iran’s leadership access to financial resources, blocking them from using the United States financial system or having access to any assets in the United States.
"Anybody who conducts significant transactions with these sanctioned individuals may be exposed to sanctions themselves," the White House said.
Tensions worsened in May when Washington ordered all countries to halt imports of Iranian oil.
"We call on the regime to abandon its nuclear ambitions, change its destructive behavior, respect the rights of its people, and return in good faith to the negotiating table," Trump said in a statement.
Iran denies seeking nuclear weapons and refers to a religious decree issued in the early 2000s by Khamenei that bans the development or use of nuclear weapons.
Sanctions were also imposed on eight senior commanders of Navy, Aerospace, and Ground Forces of the Islamic Revolutionary Guards Corps (IRGC), the U.S. Treasury Department said.
"These commanders sit atop a bureaucracy that supervises the IRGC’s malicious regional activities, including its provocative ballistic missile program, harassment and sabotage of commercial vessels in international waters, and its destabilizing presence in Syria," the department said in a statement.
Trump said the sanctions are a "strong and proportionate response to Iran's increasingly provocative actions."
Iran said on Monday U.S. cyber attacks on its military had failed, as Washington sought to rally support in the Middle East and Europe for a hardline stance that has brought it to the verge of conflict with its longtime foe.
Iran denies responsibility for the attacks on oil tankers in the Gulf. On Monday, the United States said it was building a coalition with allies to protect Gulf shipping lanes.
A coalition of nations would provide both material and financial contributions to the program, a senior U.S. State Department official said, without identifying the countries.
"It's about proactive deterrence, because the Iranians just want to go out and do what they want to do and say hey we didn't do it. We know what they've done," the official told reporters, adding that the deterrents would include cameras, binoculars and ships.
U.S. Secretary of State Mike Pompeo is in the Middle East to discuss Iran with the leaders of Saudi Arabia and the United Arab Emirates, two Sunni Muslim allies aligned against Shi'ite Muslim Iran.
"Freedom of navigation is paramount," Pompeo tweeted from the Saudi city of Jeddah.
Iran's Zarif, in his Twitter post, said: "@realDonaldTrump is 100% right that the US military has no business in the Persian Gulf. Removal of its forces is fully in line with interests of US and the world."
It was an apparent reference to a tweet in which Trump said other countries should protect their own oil shipping in the Middle East rather than have the United States protect them.
The United States accuses Iran of encouraging allies in Yemen to attack Saudi targets.
In a joint statement on Monday, the United States, Saudi Arabia, the UAE and Britain expressed concern over Middle East tensions and the dangers posed by Iranian "destabilizing activity" to peace and security in Yemen and the region.
The confrontation between Iran and the United States heated up last Thursday when Iran shot down an American drone, saying it had flown over its air space.
Washington, which said the drone was in international skies, then appeared to come close to attacking Iranian military targets, with Trump saying that he aborted a retaliatory air strike 10 minutes before it was to go ahead.
Trump said he decided the strike would have killed too many people.
Both Iran and the United States have said they do not want war and both have suggested they are willing to talk while demanding the other side move first.
Allies of the United States have been calling for steps to defuse the crisis, saying they fear a small mistake by either side could trigger war.
"We are very concerned. We don't think either side wants a war, but we are very concerned that we could get into an accidental war and we are doing everything we can to ratchet things down," British Foreign Secretary Jeremy Hunt said.
U.S. allies in Europe and Asia view Trump's decision to abandon the nuclear deal as a mistake that strengthens hardliners in Iran and weakens the pragmatic faction of President Hassan Rouhani.
France, Britain and Germany have sent an official diplomatic warning to Iran if Tehran reduces its compliance with the accord, two European diplomats said on Monday.
It was not immediately clear what consequences Iran might face for non-compliance. (Reporting by Steve Holland and Lesley Wroughton in Washington, Bozorgmehr Sharafedin in London and Stephen Kalin in Jeddah; Additional reporting by Robin Emmott in Brussels, Roberta Rampton in Washington, Parisa Hafezi in Dubai and Michelle Nichols at the United Nations; Writing by Steve Holland, Peter Graff; Editing by Jon Boyle, Howard Goller and Grant McCool)