"The Islamic republic has made up its mind and on the nuclear programme and other issues it will continue on its path with strength, with God's help," Ayatollah Ali Khamenei was quoted as saying on state television.

Khamenei, who has the last word on key policy issues, made the remarks on the eve of a Tuesday deadline for Iran to formally respond to an offer by major powers proposing a package of incentives in return for a suspension of uranium enrichment.

The comments prompted Washington to repeat a call on the United Nations to move swiftly to impose sanctions against Iran if it refuses to stop nuclear enrichment activities by an August 31 deadline set by the Security Council.

"There must be consequences if people thumb their nose at the United Nations Security Council. We will work with people on the Security Council to achieve that objective," US President George W. Bush said.

But Khameini dismissed the US position as a conspiracy against the Islamic world.

"Arrogant powers, led by the United States, are fearful of progress of Islamic countries in various dimensions," he said.

"Therefore, in the nuclear issue, even though they know Iran is not seeking nuclear weapons, they are piling on the pressure to prevent our scientific progress as an Islamic country."

A nuclear official said Iran would submit a "comprehensive written response" to the offer from the international community on Tuesday.

The proposal, backed by the five UN Security Council permanent members -- Britain, China, France, Russia and the United States -- plus Germany, offers Tehran incentives in return for a freeze of sensitive nuclear work.

Iran has been flexing its muscles in nationwide war games in which it has testfired new missiles.

In a further indication it is unlikely to back down, the country's Atomic Energy Organisation said that suspension of uranium enrichment was "no longer possible" ahead of the August 31 deadline.

"Given the technical progress of Iranian scientists, suspension of uranium is no longer possible under the current circumstances," deputy head Mohammad Saeedi, was quoted as saying by the semi-official Fars news agency.

But Tehran, which has faced a long investigation by the International Atomic Energy Agency (IAEA) over its activities, insists it has the right to nuclear technology under the Non-Proliferation Treaty.

Saeedi said Iran was also planning to start up a plant in the city of Arak to produce heavy water for a research reactor due for completion by 2009.

The IAEA is concerned about the risk of diversion of nuclear materials as the reactor could produce 8-10 kilogrammes (about 20 pounds) of plutonium a year, enough to make at least two nuclear bombs.

UN Secretary General Kofi Annan appealed Sunday for Iran to reply positively to the incentives package.

"I appeal to the government of Iran to seize this historic opportunity," Annan said. "Iran's reply will, I trust, be positive and that this will be the foundation for a final, negotiated settlement."

France too said it hoped Iran would "seize the offer made to it".

But a prominent member of the hardline-controlled parliament warned that MPs would block IAEA inspections of Iranian nuclear sites if the Security Council decided to impose sanctions.

Ahead of the latest flurry of statements from Tehran, EU foreign policy chief Javier Solana said he was to open "further contacts" with Iranian nuclear negotiator Ali Larijani.

"We both agreed on our openness, under the right circumstances, to further contacts with the aim of re-establishing confidence in the purely civilian nature of the Iranian nuclear programme," he said after a phone call with Larijani.

IAEA chief Mohammed ElBaradei is to report back to the Security Council on Iran's compliance with the deadline and if it is deemed to have failed to comply, the Security Council will consider adopting "appropriate measures" under Article 41 of Chapter Seven of the UN Charter, which sets out enforcement powers.

Iran, the number two producer in the OPEC oil cartel, has threatened to halt exports if the Security Council imposes sanctions and world crude prices jumped on Monday after Iran said it would ignore the UN deadline.

In London, benchmark Brent North Sea crude for October delivery jumped 1.03 dollars to 73.18 dollars per barrel in electronic trade.

New York's main contract, light sweet crude for delivery in September, climbed 56 cents to 71.70 dollars per barrel in pit trading.

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