JERUSALEM - Sanctions have not held up Iran's nuclear programme and it could produce bombs within two years, Israel's new top spy said on Tuesday, staking out a conservative timeline in the face of rosier US assessments.

The remarks by Major-General Aviv Kochavi, chief of military intelligence, also appeared aimed at asserting authority over the rival Israeli espionage agency Mossad, whose departing chief said this month Iran might not have nuclear arms before 2015.

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"The sanctions have had an impact on the Iranian economy, but they have had no impact on Iran's nuclear programme," Kochavi said in his first briefing to an Israeli parliamentary defence panel, according to its spokesman.

"The question is not when Iran will have a bomb but rather how much time until the Supreme Leader decides to escalate" uranium enrichment, Kochavi said, referring to a currently low-purity project that Iran says is for peaceful energy needs.

"Based on their infrastructure and the technical know-how and uranium they have, within a year or two after he makes that decision, they will have nuclear weapons."

Western officials tend to see potential Iranian military nuclear capability at mid-decade - whether due to Tehran's policies, foreign sabotage or US-led sanctions biting into key funds and supplies.

"The most recent analysis is that the sanctions have been working. They have made it much more difficult for Iran to pursue its nuclear ambition," US Secretary of State Hillary Clinton said on Jan. 10.

A senior US Treasury official, Stuart Levey, told Reuters on Jan. 12 that sanctions had "significantly" discouraged investment in Iran's energy sector.

Miffed at Mossad

The American remarks followed a briefing to reporters to mark the retirement of Mossad director Meir Dagan, in which he said Iran "will not achieve a nuclear bomb before 2015, if that," because of its domestic ferment and foreign pressure.

Though military intelligence has traditionally enjoyed precedence over the Mossad in setting Israel's strategic assessments, ex-general Dagan's words resonated widely given his acclaimed eight-year tenure and reputation for hawkishness.

Political sources said Israeli Prime Minister Benjamin Netanyahu was upset at Dagan's public pronouncement, which some analysts said might have undermined Washington's drive to spearhead greater diplomatic pressure on Tehran.

In what seemed to be an effort to make amends, the former spymaster has since said Iran could "bolt" forward with its uranium enrichment, cutting the timeline to a bomb.   An Israeli official who attended Kochavi's briefing and who is familiar with intelligence affairs voiced belief that the general had Dagan in mind when he spoke.

"This is a new head of military intelligence, so he's making very clear what the national estimate is, despite what we heard recently from the Mossad," the official said.

A career infantryman, Kochavi assumed his current post last month. His predecessor, Amos Yadlin, has been reticent about the Dagan flap, not least as the Mossad chief had counselled against Israel attacking Iran preemptively. Yadlin was among the eight F-16 pilots who bombed Iraq's atomic reactor in 1981 - a precedent Israelis cite in making veiled threats against Iran.

According to Kochavi, the first Iranian bomb, if built, would be a crude device with limited means of deployment.

A nuclear warhead that could be mounted on a long-range missile "could still take (Iran) several years to develop," Kochavi said, according to the parliamentary spokesman.