Foreign Minister Kamal Kharazi was quoted as saying during a trip to Uganda that his government would answer any US menace, adding: "We are not afraid of that country's threats."

US President George W. Bush said on Monday he could not rule out a resort to military action if the United States failed to persuade Iran to abandon a nuclear energy programme it charges is a cover for developing the atomic bomb.

"I hope we can solve it diplomatically, but I won't ever take any option off the table," Bush said.

US secretary of state-designate Condoleezza Rice also this week called for world action to keep Iran from building nuclear weapons, and repeated a threat to haul Tehran before the UN Security Council for possible sanctions.

Iran vehemently denies it is developing nuclear weapons, insisting that its nuclear programme is merely directed at generating electricity.

The UN nuclear watchdog, the International Atomic Energy Agency, has been investigating Iran for two years. IAEA chief Mohamed ElBaradei has said there is no proof that Iran is hiding weapons work but that "the jury is still out."

Kharazi, touring Africa with President Mohammad Khatami, said Washington was using "psychological warfare" against Iran.

"We know the enemy and his plans, but we will go on with our policies and although we do not wish to get into conflict with anyone, we will strongly defend our national interests," he said.

"They have initiated a psychological game in order to influence us, but we have experience in this field... the Iranian nation will not show weakness in the face of threats, and will defend its interests."

A report published in the New Yorker magazine this week said US commandos had been operating inside Iran since mid-2004 to search out potential targets for attack.

However the Pentagon said the report was "riddled with errors."

And Ali Agha Mohammadi, a spokesman for Iran's Supreme National Security Council, also dismissed the report as part of a "psychological campaign" directed against Iran's clerical regime.

"American commandos are not able to enter Iran so easily to spy...It would simplistic to accept such an idea," he said on Wednesday.

Influential former president Akbar Hashemi Rafsanjani also said Tuesday that Iran would not be intimidated by "foreign enemies" and cautioned Washington against contemplating an attack.

"We are not afraid of foreign enemies' threats and sanctions, since they know well that throughout its Islamic and ancient history, Iran has been no place for adventurism," Rafsanjani said.

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