Iran has warned it will strike a "thunderous blow" against Israel in retaliation for any military strikes against its nuclear programme.

In a belligerent speech to mark the death anniversary of Ayatollah Ruhollah Khomeini, the Islamic republic also accused accused the West of telling "lies" against Iran to divert attention from its own economic problems.

Ayatollah Ali Khamenei, the Supreme leader denied Iran is developing nuclear weapons."What Americans and Westerners do is idiotic. They magnify the nuclear issue to cover up their own problems - they are deceitfully using the term nuclear weapons," he said in a televised speech.

Suggestions of possible military strikes against Tehran reflected the increased vulnerability felt by Israel and the United States since the fall of ally Hosni Mubarak's regime in Egypt last year, but Iran is ready to retaliate if it attacked.

If Israel made "any mis-step or wrong action, it will fall on their heads like thunder," he said.

His comments for a largely domestic audience follow renewed talks in Baghdad last month between Tehran and the five permanent members of the United Nations Security Council and Germany.

Further talks will be held in Moscow later this month as the United States intensifies pressure on Iran's main trade partners, including India, Japan and South Korea, to reduce their dependence on Iranian oil. President Obama's Special Envoy and Coordinator for International Energy Affairs, Carlos Pascual, has been holding a series of meetings with ministers in those countries to help identify alternative sources of oil.

The threat of new US sanctions against those countries who do not significantly reduce their imports of Iranian oil has alarmed Tehran, but Ayatollah Khamenei warned further measures to isolate Iran will only increase hatred of America and the West among its people.

"The Iranian people have proved they can progress without the United States, and while being an enemy of the United States," he said. "International political circles and media talk about the danger of a nuclear Iran, that a nuclear Iran is dangerous. I say that they lie. They are deceiving," Khamenei said.

"What they are afraid of - and should be afraid of - is not a nuclear but an Islamic Iran."

Sanctions had succeeded only in "hatred and animosity of the West in the hearts of the Iranian people," he added.

Iran's spiritual leader, who retains control of Tehran's nuclear programme and is senior to President Mahmoud Ahmedinejad, has previously denounced nuclear weapons and said to develop them would be "a great sin." But in his speech yesterday he reserved the country's right to develop its own technology and resources. It is, he said, "forbidden to stop on the path to progress, in the political sphere and in the sphere of science and technology."

Despite his belligerent comments, Tehran has shown greater flexibility in its dealings with Western officials recently, raising hopes that agreement may yet be possible.

It has been waging its own diplomatic campaign to urge long-time allies and trade partners, like India, to resist American pressure on sanctions while engaging with the G5+1 countries to explore solutions to the stand-off.

Observers say that despite its defiant rhetoric, Tehran fears the impact on its economy of new US sanctions following the June 28 deadline and may be ready to make concessions on higher-grade uranium enrichment which could be diverted from civil nuclear energy production to military use.----

Source: http://www.telegraph.co.uk/news/worldnews/middleeast/iran/9308922/Iran-warns-Israel-attack-would-trigger-a-thunderous-blow.html