WASHINGTON, Aug 1 (Reuters) - Iran is heading toward a major breakthrough in its nuclear program, Israeli Deputy Prime Minister Shaul Mofaz said on Friday.

"As soon as 2010 (Iran) will have the option to reach (uranium production) at military levels," he told an audience in Washington.

But Mofaz said he supported diplomacy and spoke of other options as "last resort".

"It is a race against time and time is winning," Mofaz said.

The West accuses Iran of seeking to develop nuclear weapons under cover of a civilian energy program; Iran denies it. There has been speculation that either the United States or Israel could attack Iran's nuclear facilities, though both have said force should be a last resort.

Western powers gave Iran two weeks from July 19 to respond to their offer to hold off on imposing more U.N. sanctions on Iran if Tehran would freeze any expansion of its nuclear work.

But Iran's Supreme Leader Ayatollah Ali Khamenei said this week that Iran would press ahead with its nuclear path.

Mofaz said another U.N. Security Council resolution with new sanctions will be needed this year if Iran does not meet the deadline for responding this weekend.

"We must insist on Iran meeting the timetable set," Mofaz said in his remarks at the Washington Institute. "The red line should be that there is no uranium enrichment on Iranian soil."

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