Interior Minister Mostafa Pour Mohammadi, in a speech marking the 28th anniversary of the seizure of the US embassy in Tehran, said Iranians needed to cut back on consumption to ensure the sanctions had no effect.

"All of us in our households can bring down our consumption expenditure by 10 percent. Our culture of consumption needs to be changed. We need to send a call to the young people," he said.

"The sanctions I am sure will not affect and harm the Iranian people. But we should do everything to ensure our progress is not stopped," he told thousands of schoolchildren and students chanting "Death to America!"

"The cabinet is looking into this," he added.

Pour Mohammadi's comments appeared to refer to Iran's frenzied energy consumption, a serious issue ahead of winter when excess demand has caused gas shortages in the past.

He said that Iran's rationing of petrol, imposed this year to reduce dependence on foreign imports of refined oil, had already reduced consumption by 25 percent and was an example of what could be done.

The minister's cautioning remarks were in contrast to the usual official rhetoric over sanctions led by President Mahmoud Ahmadinejad, who has repeatedly brushed off sanctions as just "pieces of paper."

"I assure you that God willing the deceitful plots hatched by the enemy will be futile and the process of development will not be disrupted," Pour Mohammadi added.

Iran has already been the target of two sets of UN sanctions over its nuclear programme, and the United States and its Western allies are pushing for a third package that could hit the wider economy.

Western powers have also been acting unilaterally against Iran, most notably by putting pressure on its banking system.

Pour Mohammadi's comments come after political directors from six world powers agreed in London on Friday to push towards a third round of UN sanctions against Tehran if Iranian defiance continued.

However it appears that veto-wielding UN Security Council members China and Russia are unenthusiastic about further punitive actions, much to the frustration of the United States.

Washington accuses Tehran of seeking a nuclear weapon but Iran insists its nuclear programme is peaceful, and refuses to yield to the key demand of the West that it suspend uranium enrichment activities.

The United States has also never ruled out military action against Tehran to end its defiance, with US President George W. Bush raising the prospect of "nuclear holocaust" and "World War III" if Iran acquired atomic weapons.

Pour Mohammadi described such warnings as a "joke" that even the Americans did not believe, but nonetheless said Iran needed to show "national solidarity" at this time.

"We have to be steadfast and the plots will not harm us. The secret of national solidarity is what did away with military plots in the past by the enemy," he said.

His speech marked the anniversary of an event that led Washington to break off diplomatic relations with the Islamic republic, a rupture that has yet to be healed.

Iran still lauds the seizure as a revolutionary act while Washington condemns it as an abuse of human rights. Pour Mohammadi described the seizure as a "great and glorious event" that was still inspiring Iran.

related report
Banking sanctions bite in Iran
The Iranian economy is starting to feel the sting from a raft of banking sanctions applied by the United States to pressure Tehran over its controversial nuclear drive, analysts said.

Washington has blacklisted Iran's three main banks and has also successfully encouraged virtually all major European banks into cutting business with the Islamic republic.

"Practically all the major European banks have ceased their cooperation with Iran," said an official from Iran's Export Development Bank, who asked not to be named.

"It is no longer possible to wire money by dollar into Iran and for the payments in euro there are just three European banks. They could stop cooperating with us at any moment," said the official.

British-Asian bank HSBC and the Swiss giants UBS and Credit Suisse were the first to cut business with Iran back in 2006 while Deutsche Bank, Commerzbank and BNP Paribas have followed suit this year.

Meanwhile, Washington has blacklisted Iranian banks Melli, Mellat and Saderat, accusing them of acting as a conduit for "terrorist financing" -- something the banks vehemently deny.

The decision has effectively cut the Iranian banks off from the dollar-based financial system and turned them into pariah institutions with whom their foreign counterparts are unwilling to deal.

"There has never been a single example of the involvement of the bank in any illegal activity," Bank Mellat said in an angry statement rejecting the allegations.

But it acknowledged the measures would be felt by ordinary Iranians: "It may inflict harm on the lives of ordinary people using services."

The moves against Iran's financial system have been in parallel to two sets of UN sanctions against its ballistic missile and nuclear programmes. But it is the unilateral US actions that are being felt most keenly in Iran.

In essence, the sanctions aim at cutting off Iran's financial lifeblood.

Foreign banks, who were already refusing to accept letters of credit issued by their Iranian counterparts, are now refusing to carry out even simple operations of money transfers to Iran.

"We wanted to import equipment to construct prefabricated houses but the Australian banks refused to accept letters of credit," said Touraj, an Iranian businessman who preferred not to give his surname.

Even Asian banks from countries that still have close economic links with Iran -- such as South Korea and China -- have been imposing restrictions on business with the Islamic republic.

"The big banks from China, one of Iran's most important partners, are now refusing to deal with Iran as they have important interests in the United States and fear reprisals," said Mehrdad Mahmoudi, a leading currency dealer.

Even banks on the Arabian peninsuala -- notably US ally the United Arab Emirates, Iran's number one trading partner -- may not be prepared to deal with the Islamic republic for ever.

"Iranian banks can still use the services of small Asian banks or the Persian Gulf but that will not last forever," said Bijan Khajepour, director of Atieh Consulting in Tehran.

"Firms are increasingly having to pay in cash or go through a third country to import their goods which will make the finished product even more expensive," he added.

Iran status as the world's fourth oil exporter and OPEC's second largest means it cannot allow itself to become detached from the world economy. Foreign currency oil revenues are expected to reach 70 billion dollars this year.

"The aim of the Americans is to cut financial links between Iran and the rest of the world," said a banking expert, who asked not to be named.

"The great lesson of North Korea that the Americans understood was that they do not necessarily need to resort to the Security Council," he said, referring to US pressure on Pyongyang's nuclear programme.

"They can exercise the maximum pressure just by imposing sanctions through their own financial system."

The Iranian economy is starting to feel the sting from a raft of banking sanctions applied by the United States to pressure Tehran over its controversial nuclear drive, analysts said.

Washington has blacklisted Iran's three main banks and has also successfully encouraged virtually all major European banks into cutting business with the Islamic republic.

"Practically all the major European banks have ceased their cooperation with Iran," said an official from Iran's Export Development Bank, who asked not to be named.

"It is no longer possible to wire money by dollar into Iran and for the payments in euro there are just three European banks. They could stop cooperating with us at any moment," said the official.

British-Asian bank HSBC and the Swiss giants UBS and Credit Suisse were the first to cut business with Iran back in 2006 while Deutsche Bank, Commerzbank and BNP Paribas have followed suit this year.

Meanwhile, Washington has blacklisted Iranian banks Melli, Mellat and Saderat, accusing them of acting as a conduit for "terrorist financing" -- something the banks vehemently deny.

The decision has effectively cut the Iranian banks off from the dollar-based financial system and turned them into pariah institutions with whom their foreign counterparts are unwilling to deal.

"There has never been a single example of the involvement of the bank in any illegal activity," Bank Mellat said in an angry statement rejecting the allegations.

But it acknowledged the measures would be felt by ordinary Iranians: "It may inflict harm on the lives of ordinary people using services."

The moves against Iran's financial system have been in parallel to two sets of UN sanctions against its ballistic missile and nuclear programmes. But it is the unilateral US actions that are being felt most keenly in Iran.

In essence, the sanctions aim at cutting off Iran's financial lifeblood.

Foreign banks, who were already refusing to accept letters of credit issued by their Iranian counterparts, are now refusing to carry out even simple operations of money transfers to Iran.

"We wanted to import equipment to construct prefabricated houses but the Australian banks refused to accept letters of credit," said Touraj, an Iranian businessman who preferred not to give his surname.

Even Asian banks from countries that still have close economic links with Iran -- such as South Korea and China -- have been imposing restrictions on business with the Islamic republic.

"The big banks from China, one of Iran's most important partners, are now refusing to deal with Iran as they have important interests in the United States and fear reprisals," said Mehrdad Mahmoudi, a leading currency dealer.

Even banks on the Arabian peninsuala -- notably US ally the United Arab Emirates, Iran's number one trading partner -- may not be prepared to deal with the Islamic republic for ever.

"Iranian banks can still use the services of small Asian banks or the Persian Gulf but that will not last forever," said Bijan Khajepour, director of Atieh Consulting in Tehran.

"Firms are increasingly having to pay in cash or go through a third country to import their goods which will make the finished product even more expensive," he added.

Iran status as the world's fourth oil exporter and OPEC's second largest means it cannot allow itself to become detached from the world economy. Foreign currency oil revenues are expected to reach 70 billion dollars this year.

"The aim of the Americans is to cut financial links between Iran and the rest of the world," said a banking expert, who asked not to be named.

"The great lesson of North Korea that the Americans understood was that they do not necessarily need to resort to the Security Council," he said, referring to US pressure on Pyongyang's nuclear programme.

"They can exercise the maximum pressure just by imposing sanctions through their own financial system."

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