"We are not afraid of Western sanctions," he told thousands of people in a speech in the southern city of Shiraz broadcast by state television.

"The Iranian people, thanks to God, will resist in the face of sanctions and economic blockades and will further intensify their progress."

Iran has been hit by three sets of UN Security Council sanctions over its nuclear programme, mainly targeting its ballistic missile and atomic industries.

More significantly for the wider economy, the United States has also pressured European firms and banks to reduce their dealings with Iran as another lever with which to exert pressure over the nuclear programme.

These measures have severely complicated transferring money from Europe to Iran, made it hard for Iran to obtain credit letters from European banks, and slowed Western investment in the hydrocarbon sector.

"We have transformed these threats and sanctions into opportunities and even according to our enemies we have become the number one power in the region," Khamenei said.

The United States imposed a blanket trade embargo against Iran after the 1979 Islamic revolution which continues today with only small exceptions.

The West fears Iran wants to use its nuclear programme to make an atomic weapon but Iran insists the drive is peaceful and solely aimed at providing energy for a growing population.

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