"Iran is the biggest military power in the region (with) 10 million volunteers for martyrdom operations ... to turn Iran into a terrible nightmare for the United States," General Mohammad Bagher Zolghadr, deputy commander of Iran's hardline Revolutionary Guards, told the Kayhan newspaper.

His comments came against a backdrop of an escalating war of words between Iran and the United States, which has hinted at possible military action over Tehran's nuclear programme which it alleges is a cover to build an atomic bomb.

"If the United States wants to attack the Islamic republic, it must know that Iran has no limits to defend itself and will be capable of delivering fatal blows against the aggressor wherever it decides," Zolghadr said.

"We will not welcome war but if the United States commits an error, we will give them such a lesson that they will never recover."

In recent days US officials have hardened their tone against Iran, which US President George W. Bush has already lumped into an "axis of evil".

Earlier this month, Bush said he could not rule out using force if Tehran failed to rein in its nuclear plans, and US Vice President Dick Cheney said Iran was "right at the top of the list" of global trouble spots.

While Iran insists its nuclear activities are strictly peaceful, Britain, France and Germany are engaged in diplomatic efforts to secure long-term guarantees that the clerical regime will not seek the bomb.

Iran denied that its negotiations with the three major European powers are at an impasse after reports the EU was hardening its stance and calling on Tehran completely to dismantle its nuclear fuel programme in order to guarantee that it does not seek atomic weapons.

"The publication of such reports is aimed at overshadowing the constructive nature of the negotiations and demonstrates the discontent of those who are not satisfied with their progress and are trying to prevent their success," foreign ministry spokesman Hamid Reza Asefi said, according to press reports Thursday.

Iran has suspended uranium enrichment as a confidence-building measure but the EU now wants it to definitively abandon enrichment as well as any activities for making plutonium.

According to a report on a closed-door meeting in Geneva this month, representatives of Britain, France and Germany told Iran that "nothing short of full cessation and dismantling of Iran's fuel cycle efforts would give the EU3 the objective guarantees they need that Iran's nuclear program is peaceful."

Iran insists its nuclear activities are peaceful and that the nuclear Non-Proliferation Treaty guarantees a right to peaceful enrichment activities.

The Geneva meeting was the second round of talks on a potentially lucrative trade pact after a deal clinched in November by the Europeans for Iran to suspend uranium enrichment, the key process that makes what can be fuel for nuclear reactors but also the explosive core of atomic bombs.

The trade deal forms part of a package of incentives for Iran if the talks produce "objective guarantees" that the country is not seeking to develop nuclear weapons.

But top nuclear negotiator Hossein Moussavian said "the question of halting Iran's nuclear activities has never been a part of the negotiations" with the

"The objective that has been fixed is for Iran to deliver objective guarantees to the other side so that they can be certain the Iranian nuclear fuel cycle will always stay peaceful and never be used to make an atomic bomb," he was quoted as saying by the Shargh newspaper.

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