President Mahmoud Ahmadinejad yesterday warned that world powers would regret any moves to slap new sanctions on Iran, while stressing that Tehran was still ready for a UN-brokered nuclear fuel deal.
His latest salvo came as US Secretary of State Hillary Clinton toured the Gulf to seek backing for possible sanctions against Iran for defiantly pursuing its nuclear programme.
"If anybody seeks to create problems for Iran, our response will not be like before," the hardline Iranian president told a packed news conference in Tehran.
"Something in response will be done which will make them (the world powers) regret" their move, he said.
Mr Ahmadinejad said negotiations over a UN-drafted nuclear fuel exchange were "not closed yet" and expressed readiness to buy the material even from Iran's arch-foe the US.
Last year the International Atomic Energy Agency proposed sending Iranian low-enriched uranium (LEU) abroad for further enrichment, denying Tehran refining capacity world powers fear could be used to help build an atomic bomb.
The offer would have seen the uranium returned to Iran in a high-grade form for use in a medical research reactor, but the plan has been rejected by the Islamic republic.
Mr Ahmadinejad yesterday insisted that the exchange had to be "simultaneous", an Iranian stance that has led to a deadlock over the deal. "We are ready for an exchange even with the US. The US can come and give us their 20 per cent fuel and we will pay them if they want, or we can give them 3.5 per cent fuel," Mr Ahmadinejad said.
"But the swap should take place simultaneously and we will put our fuel under the supervision of the (UN atomic) agency in Iran," he added without clarifying whether the exchange must take place inside the country as insisted on by other Iranian officials.
Mr Ahmadinejad also indicated Tehran could suspend enriching uranium to the 20 per cent level if world powers supplied it the required fuel for Tehran reactor.
"We are not insisting on doing this (20 per cent enrichment) although we have the capability. If they supplied the (uranium enriched to) 20 per cent, the situation may change," he said in answer to a question if Iran would stop the controversial enrichment started on February 9.
In a joint letter to the IAEA, the US, Russia and France wrote: "If Iran goes forward with this escalation, it would raise concerns about Iran's nuclear intentions, in light of the fact that Iran cannot produce the needed nuclear fuel in time to ensure the uninterrupted production of medical isotopes by the Tehran Research Reactor."
Mr Ahmadinejad's remarks regarding the fuel deal and suspension of 20 per cent uranium enrichment come despite his own repeated defiance in ordering Tehran's atomic body to begin the high grade enrichment work.
Russia, a long time nuclear ally of Iran, said Tehran should improve its cooperation with the IAEA and that new sanctions were not excluded if it fails to fulfil its obligations.
"If these obligations are not fulfilled no one can exclude the application of sanctions," Russian President Dmitry Medvedev's spokesman told reporters in Moscow.
Earlier yesterday, Mrs Clinton said that there was no evidence to prove Iran's claim that its nuclear programme is peaceful.
"Iran is the largest supporter of terrorism in the world today," Mrs Clinton told students in Saudi Arabia as she drummed up support for fresh sanctions against Tehran.
"They say they are only doing this for nuclear peaceful purposes, but the evidence doesn't support that," she said, a day after commenting that Iran was moving towards "military dictatorship".
Mr Ahmadinejad snubbed Mrs Clinton, saying Iran did not take her comment about military dictatorship "seriously".
Washington and its ally Israel have also never ruled out a military strike against Iran's nuclear sites.
Speaking in Amman, the top US military adviser, Admiral Mike Mullen, said that while Iran was "becoming a nuclear weapons-capable country", Washington does not rule out dialogue or military action.
Admiral Mullen, the chairman of the Joint Chiefs of Staff, said "the priority for President (Barack) Obama and his Administration has been to initiate a dialogue and engagement (with Iran) while at the same time keeping all options on the table."