"I hope that we can find a solution (to the Iranian nuclear issue) through dialogue," Chirac said in the central Chinese city of Wuhan.
"If it goes on and appears that the dialogue will not end, then it is probably necessary to find calibrated, adaptable, temporary and reversible sanctions that will be imposed to show Iran that the entire international community does not understand their position and is hostile to it."
Chirac's statements followed reports from Iran that scientists had begun feeding gas into a second cascade of centrifuges to enrich uranium, defying UN threats of sanctions over Iran's nuclear program.
"The second cascade was set up two weeks ago and this week gas was injected in them," an unidentified official told the ISNA news agency in Tehran. "We have the product of the second cascade."
Iran on Wednesday confirmed it had installed new equipment to step up uranium enrichment and said it would imminently start pumping gas into the equipment.
The announcement came as six major powers huddled behind closed doors in New York to review a draft UN Security Council resolution mandating sanctions against Iran over its refusal to halt its sensitive nuclear fuel work, which the West fears could be diverted to make a nuclear bomb.
Chirac, who was in China on the third day of a four-day visit, said that he had "never been a great believer in sanctions" and that he "has never been convinced of their effectiveness."
But "in this particular case, it is obvious and the entire international community recognises this, notably China, but also Russia, the Europeans and the United States that the ambitions clearly signalled by Iran are not compatible with the idea we are making concerning non-proliferation."
A top Iranian cleric, who preached Tehran's Friday sermon defied the UN over probable sanctions, calling again for a return to negotiations.
"If you want to go ahead with the sanctions, go ahead," said Ahmad Khatami in a challenging tone.
"You have imposed sanctions on us for the past 27 years. What did you gain? It was with these sanctions that Iranian youth reached nuclear energy and self sufficiency." In New York, the talks at Britain's UN mission brought together ambassadors from the UN Security Council's five veto-wielding members -- Britain, China, France, Russia and the United States -- as well as from Germany.
The focus was on the resolution crafted by Britain, France and Germany in consultations with Washington to penalise Tehran for failing to heed UN demands that it freeze its uranium enrichment activities, which the West fears could lead to Iran building a nuclear warhead.
On Thursday in Beijing, a joint communiqué released by Chinese President Hu Jintao and Chirac called on Iran to heed UN mandates over its nuclear program and abide by an earlier Security Council resolution to abandon its uranium enrichment program or face sanctions.
"The two sides call for respect of Security Council resolution 1696 and agree to pursue their joint efforts for a resolution of the nuclear issue to maintain a close permanent contact on this matter," the statement said.

Copyright AFP (Agence France-Presse), 2006