Iran vows no nuclear retreat despite sanctions threat

TEHRAN (Reuters) - President Mahmoud Ahmadinejad said on Thursday Iran would not halt sensitive nuclear work the West suspects is aimed at making bombs and brushed aside threats of more sanctions.

Ahmadinejad, who is due to attend the U.N.'s general assembly debate next week, also said he was willing to meet with both U.S. presidential candidates while in New York.

"We are ready for talks that are completely free and in front of the media and at the site of the United Nations with America's presidential candidates," he told a news conference.

Dealing with Iran has become an issue in the November U.S. presidential election campaign, with Democrat Barack Obama and Republican John McCain sparring over Obama's stated readiness to talk to Ahmadinejad and other U.S. adversaries if elected.

Ahmadinejad has previously expressed willingness to hold direct talks with U.S. President George W. Bush. But Washington says Tehran must first suspend uranium enrichment before the two sides can sit down and talk about nuclear and other issues.

Major powers have offered a package of trade and other incentives if the Islamic Republic stops enriching uranium, a process the West believes Iran is seeking to master to build nuclear warheads. Tehran denies the charge.

Ahmadinejad made clear Iran, the world's fourth-largest oil exporter, had no plans to back down in the dispute.

"Whatever they do, Iran will continue its activities. Sanctions are not important," he said. "The era of (uranium enrichment) suspension has ended."

The United States, Britain and France this week vowed to seek harsher sanctions on Tehran over its defiance of U.N. demands for full disclosure and a halt to enrichment, which can have both civilian and military purposes.

Their calls came after the U.N.'s International Atomic Energy Agency said in a report on Monday that Iranian stonewalling had brought to a standstill its investigation into whether Iran had covertly researched ways to make an atom bomb.

"NO SURRENDER"

Ahmadinejad said the IAEA report had confirmed the peaceful nature of Iran's nuclear work and that Tehran had cooperated with the Vienna-based U.N. agency with "full transparency".

But he also said the IAEA had no mandate to consider Western intelligence, which alleges that Iran had linked projects to process uranium, test high explosives and modify a missile cone in a way suitable for a nuclear warhead.

Iran, which has repeatedly denied the allegations, says its nuclear activities are only for generating electricity.

Ahmadinejad told Iran's Press TV earlier on Thursday: "The United States government has made a claim that is beyond and outside of the purview and the provisions of the IAEA and the IAEA does not have a mandate really to examine such claims."

Iran has withstood three rounds of limited U.N. sanctions imposed so far and may count on Russia, at odds with Western powers over Georgia, to hold up harsh action by the U.N. Security Council, analysts say.

The United States and Israel have not ruled out military action if diplomacy fails to resolve the nuclear standoff.

Ahmadinejad, who again predicted the demise of Israel, said Iran would defend itself if attacked but that the Jewish state was in "a weak position to launch attacks against any other country," Press TV reported.

(Additional reporting by Zahra Hosseinian and Edmund Blair; writing by Fredrik Dahl; editing by Philippa Fletcher)