JERUSALEM (Reuters) -- Israel's military chief said he does not believe Iran will decide to produce an atomic bomb, describing its leadership as "very rational" in an interview published on Wednesday.

Lieutenant-General Benny Gantz's characterization of Iran's rulers appeared to be at odds with Prime Minister Benjamin Netanyahu's oft-stated warnings that Islamic leaders could opt to use nuclear weapons even at the risk of devastating retaliation.

"Iran is moving step-by-step towards a point where it will be able to decide if it wants to make a nuclear bomb. It has not decided yet whether to go the extra mile," Gantz told the Haaretz daily.

"In my opinion, (Iranian Supreme Leader Ayatollah Ali Khamenei) will be making a huge mistake if he does that and I don't think he will want to go the extra mile," Gantz said.

Israel, believed to have the Middle East's only nuclear arsenal, sees a nuclear armed Iran as an existential threat. Tehran denies seeking the bomb and says it is enriching uranium for peaceful purposes.

Both Israel and the United States have declined to rule out military action against Iran should economic sanctions fail to curb its nuclear program, saying all options were on the table.

"I think the Iranian leadership is comprised of very rational people," Gantz said. "But I agree that such a capability in the hands of Islamic fundamentalists, who at some moments may make different calculations, is a dangerous thing."

In an interview with CNN on Tuesday, Netanyahu said he wouldn't want to bet "the security of the world on Iran's rational behavior". A "militant Islamic regime", he said, "can put their ideology before their survival."

Sanctions

Iran this month began negotiations over its nuclear program with six world powers for the first time in more than a year.

"Either Iran takes its nuclear program to a civilian footing only, or the world, perhaps us too, will have to do something. We're closer to the end of the discussions than the middle," Gantz said.

Western diplomats greeted Iran's first meeting with the United States, Russia, China, Germany, France and Britain with cautious optimism, and the two sides agreed to meet again in Baghdad on May 23.

But Israeli Defense Minister Ehud Barak last week voiced skepticism that negotiations will curb Tehran's nuclear ambitions. Netanyahu said the hiatus in talks awarded the Iranians a "freebie" -- more time to enrich uranium.

Gantz said international pressure on Iran "is beginning to bear fruit, both on the diplomatic level and on the economic sanctions level".

Netanyahu said on CNN the sanctions were "certainly taking a bite out of the Iranian economy but so far they haven't rolled back the Iranian program or even stopped it by one iota."

In an interview that appeared on Wednesday in Israel's Maariv newspaper, President Shimon Peres echoed doubts voiced by some former top Israeli security officials over whether a military strike against Iranian nuclear facilities would be effective.

"You could also ask whether military sanctions would work. Nothing is clear. Therefore it makes more sense to start with economic, political and moral sanctions, without taking military sanctions off the table," Peres said.