Iran's Supreme Leader Ayatollah Ali Khamenei on Sunday accused the United States and its allies of lying about the threat of a nuclear Iran to cover up their own economic problems, state television reported.
In a fiery address marking the 23rd anniversary of the death of Ayatollah Ruhollah Khomeini, the founder of the Islamic Republic, Khamenei also warned Israel against any attack on Iran, saying it would receive a "thunderous blow".
Khamenei - who has total command over Iran's nuclear policy - has publicly forbidden the development of nuclear weapons, but Western nations suspect that Tehran is developing in isolation each of the components required for an atomic bomb capability.
"What Americans and Westerners do is idiotic. They magnify the nuclear issue to cover up their own problems," Khamenei said, referring to the economic gloom in the U.S. and Europe.
"They are deceitfully using the term nuclear weapons," he added.
Iran's supreme leader said Israeli talk of military strikes showed it felt vulnerable after the fall of former Egyptian President Hosni Mubarak, a U.S. and Western ally, last year. "If they take any miscalculated action, they will receive a thunderous blow."
On Saturday a senior military commander said Iranian missiles could reach all parts of Israel and threatened U.S. bases in the region if Iran was attacked.
Away from what is common-place fierce rhetoric by Iranian officials, Iran held negotiations with world powers in Baghdad on May 23-24 in an attempt to reach agreement over concerns about its nuclear programme.
Diplomats say Iranian negotiators were more forthcoming than in previous talks, and believe Khamenei has given his negotiating team a wider hand to explore a deal.
During his address, Khamenei said that sanctions were not hampering Iran and were "deepening Iran's hatred towards the West".
Yet analysts say there are clear signs the Islamic Republic's oil revenues and economy have been suffering since the United States and the European Union introduced tough new embargoes at the start of this year.
Iran maintains it will not give up what it says is its right to establish a peaceful nuclear programme but has at times appeared flexible to curbing high-grade uranium enrichment that is the West's most pressing concern.
Another round of talks has been scheduled for June 18-19 in Moscow. Last week U.S. Secretary of State Hillary Clinton indicated the meeting would be crucial because of Washington's need to see "concrete actions".