Oil Report

UPDATE 2-Iran leader says world can't stop nuclear progress

* World can’t block Iran nuclear path -- Khamenei

* Global powers reach “dead end” -- Ahmadinejad

(Adds quotes, background)

TEHRAN, March 20 (Reuters) - Iran has shown world powers they cannot block its nuclear progress, Supreme Leader Ayatollah Ali Khamenei said on Friday, but he made no mention of a new message by U.S. President Barack Obama to his country.

In a separate recorded speech to mark the Iranian New Year, President Mahmoud Ahmadinejad said global powers had reached a “dead end”. But he too made no mention of Obama’s videotaped offer of a “new beginning” of diplomatic engagement.

Khamenei said Iran, the world’s fourth-largest oil producer, had managed to limit the impact of the global economic downturn and of sanctions imposed on it over its nuclear activities.

Iran and the United States are embroiled in a dispute over Tehran’s nuclear programme, which Washington and its allies suspect is aimed at making bombs. Tehran says the programme is for peaceful power generation.

After taking office in January and in a major shift in U.S. policy, Obama offered to extend a hand of peace to Iran if it “unclenched its fist”.

In an unprecedented video nessage released to mark Iranian New Year, he called for “engagement that is honest and grounded in mutual respect”.

Iran cautiously welcomed the overture on Friday, saying it wanted to see “practical steps”.

Khamenei hailed tests last month of Iran’s first nuclear power plant, at Bushehr, as an important development.

“This is the results of the progress of our scientists ... which persuaded the whole world that the path of Iran’s nuclear progress could not be blocked,” said Khamenei, Iran’s top authority with final say on all matters of state.

Iran says its needs nuclear energy so that it can export more of its huge oil and gas reserves. Its refusal to halt work which can have both civilian and military purposes has drawn three rounds of limited U.N. sanctions since late 2006.

Like other oil producers, it is facing declining export revenues due to a sharp drop in crude prices since mid-2008. Analysts also say the sanctions are deterring foreign investors.

Khamenei said Iranian officials had managed “to control to a great extent the negative consequences of this wave”.

But he also told Iranians they were consuming too much. “A great deal of our country’s resources ... is wasted on our excessive consumption in all areas,” he said.

Ahmadinejad last week said the capitalist system was close to collapse. In his latest speech he said the economic crisis showed the failure of Western policies.

“Global powers have reached a complete dead end. A dead end in the field of theories, management and implementation,” Ahmadinejad said.

“Big security and political crises in the world became deeper and deeper ... and today the big economic crisis is a sign of the complete failure of the policies, theories and expansionist goals of the world’s material powers,” he said. (Writing by Fredrik Dahl; editing by Andrew Roche)