Ahmadinejad Says West Waging Economic War on Iran as Rial Plunges

Iran will not back down on its nuclear program despite the problems caused by Western sanctions, including a dramatic slide in the value of its currency, President Mahmoud Ahmadinejad said on Tuesday.

"We are not a people to retreat on the nuclear issue," he told a news conference in Tehran.

"If somebody thinks they can pressure Iran, they are certainly wrong and they must correct their behavior," he said.

Ahmadinejad's comments came amid an accelerated slide in Iran's currency, which has now lost more than 80 percent of its value compared to a year ago -- with 17 percent of its value shed on Monday alone.

The currency, the rial, slipped another four percent on Tuesday to close at 36,100 to the dollar, according to exchange tracking websites.

Ahmadinejad said the plunge was part of an economic "war" waged by the West on the Islamic republic and "a psychological war on the exchange market."

Iran, he said, had sufficient foreign currency reserves.

Those reserves were estimated at around $100 billion at the end of last year, thanks to surging oil exports.

But the U.S. Treasury, which is monitoring the sanctions, believes Iran's foreign earnings have been cut by $5 billion a month under the Western economic measures.

"These are the most punishing sanctions we have ever been able to amass as an international community and they are very important for trying to get Iran's attention on the important demilitarization work," U.S. State Department spokeswoman Victoria Nuland said in Washington on Monday.

In his media conference, Ahmadinejad backtracked on hints he had made during a visit to New York last week to attend a U.N. General Assembly that Iran could consider direct negotiations with the United States on the nuclear issue.

"Direct negotiation is possible, but needs conditions, and I do not think the conditions are there for talks. Dialogue should be based on fairness and mutual respect," he said.

But he also said: "I think that this situation cannot last in the relations between Iran and the United States."

Ahmadinejad on his return was criticized by hardliners in Iran for opening the door to the possibility of negotiations with America. That also fueled criticism that his government is mismanaging the economy.

The chairman of Tehran's chamber of commerce, Yahya Ale-Eshagh, was quoted as saying by the Mehr news agency that "part of this tumult is due to sanctions."

But he also said "the person who is not able to manage in a time of crisis should not continue working in his post."

Mehdi Mohammadi, a figure close to Iran's Supreme National Security Council, wrote in a piece for the Vatan Emrouz newspaper on Tuesday: "Is the currency situation in the market due to sanctions? No... The problem is not a lack of (foreign) currency."

He put blame on the government, and on unidentified "mafias" he said were profiting from the currency volatility.

Mohammadi also said holding talks with the United States was not an option.

"Past experience shows that speaking of negotiations in these conditions only sends a signal of weakness. The enemy only makes concessions and takes you serious when you're strong," he wrote.

On the prospect of a military conflict breaking out over the nuclear issue, Ahmadinejad reaffirmed that he was "not very concerned" about persistent threats from Israel.

"Iran is not a country to be shaken by, let's say, a few firecrackers," he said.

"We have never been an aggressor. But we are very good defenders who have made all attackers regret their actions," he said.

"They are pressuring us and they are portraying us as the ones who are adventurous," he said.