* Rouhani vows peaceful nuclear work "forever"
* Sanctions are brutal and wrong, president says
* Iran test fires two new missiles (Adds analyst comment, context, paragraphs 3-4, 7-8, 12, 20)
By Mehrdad Balali and William Maclean
DUBAI, Feb 11 President Hassan Rouhani dismissed on Tuesday a Western assertion that military force could yet solve a decade-old nuclear dispute if negotiations proved fruitless, pledging that Iran would pursue peaceful atomic research "forever".
In a speech marking the 35th anniversary of the 1979 Islamic revolution, Rouhani also attacked economic sanctions imposed by the West as "brutal, illegal and wrong" and said countries in the region had nothing to fear from Iran.
Rouhani's comments appeared largely aimed at a domestic audience rather than signalling any shift away from a thawing in Tehran's ties with the West since he was elected president last June on a platform of easing its international isolation.
But they still underlined mistrust towards the West and the uphill task negotiators from Iran and six world powers face when they start talks next week aimed at reaching a final settlement over the Islamic Republic's nuclear programme.
In a gesture of national resolve ahead of that meeting, Iran test-fired two new domestically made missiles on Monday.
Analysts said the missile test, and a reported plan by Iranian warships to cross the Atlantic to approach U.S. shores, were aimed at a placating Iranian hardliners opposed to talks with major powers intended to settle the nuclear dispute.
Iran often announces new weapons achievements, although these are difficult to verify independently.
"There are plenty of reasons to question the weapons' capability and their impact on the strategic situation in the region," Pieter Wezeman, a senior researcher at the Stockholm International Peace Research Institute (SIPRI), said.
Rouhani said Western officials continued to argue that if the nuclear discussions came to nothing, there was always the option of using military force against its nuclear facilities.
"I say explicitly to those delusional people who say the military option is on the table, that they should change their glasses ... Our nation regards the language of threat as rude and offensive," he said.
"I want to expressly announce that the movement of the Iranian nation towards the peaks of scientific and technical progress and advancement, including peaceful nuclear technology, will be forever," he added.
Iran has previously threatened to hit Israel and U.S. bases in the region if it comes under attack, and also to block the Strait of Hormuz, the neck of the Gulf through which 40 percent of the world's seaborne oil exports pass.
Iran and six world powers struck an interim deal in November under which Tehran agreed to limit parts of its nuclear work in return for the easing of some sanctions.
Hardliners, unsettled by the foreign policy shift since Rouhani took office, have repeatedly criticised the agreement. Iran's most powerful authority, Supreme Leader Ayatollah Ali Khamenei, has so far backed the deal.
Farhang Jahanpour of Oxford University's Faculty of Oriental Studies said the missile test was a message of reassurance aimed at Iranian hardliners wary of the deal.
"The message is that 'we are not surrendering, we are still OK, we are still winning points'. The idea is to blunt the criticism of those who don't like the negotiations," he said.
Jahanpour said an announcement that Iran would send warships toward U.S. maritime borders also fell into the category of government propaganda aimed at a domestic audience each year on the revolution's anniversary.
Richard Weitz, Director of the Center for Political-Military Analysis at the Hudson Institute in the United States said the political message of the test was that "Iran can defend itself even without nuclear weapons".
"It would be helpful, from the proliferation point of view, if Iranian leaders genuinely believed this," he said.
But SIPRI's Wezeman said other regional states, including Iran's rival Saudi Arabia, continued to upgrade their forces with new advanced weapons from U.S. and European suppliers that were "far superior" to what Iran says it is fielding.
Iranian officials have criticised U.S. Secretary of State John Kerry for speaking about a potential military option.
Kerry told al Arabiya television on Jan. 23 that if Tehran did not abide by an interim deal over its nuclear programme "the military option of the United States is ready and prepared to do what it would have to do".
Rouhani said that if the powers approached Iran in the final settlement talks seeking mutual interest, respect and cooperation, they would receive a positive and proper response. If their approach was inappropriate, this would be harmful to the region.
In an apparent sign of disquiet among hardliners, a written statement by 24 lawmakers read out in parliament last week accused Rouhani of failing to authorise and fund military tests including large annual missile exercises.
"What guarantees our country's sovereignty is demonstrating full authority and defensive capabilities," the letter said. (Additional reporting by Fredrik Dahl in Vienna; Writing by William Maclean; Editing by Jon Boyle)