WASHINGTON, May 24: President George W. Bush warned Iran on Thursday that the United States and its European allies would further toughen sanctions on the Islamic Republic if Iran continues to defy UN demands to rein in its nuclear programme.

His warning, given at a White House news conference, comes days before a scheduled meeting between US and Iranian diplomats in Baghdad on Monday for talks on reducing the violence in Iraq.

“The world has spoken, and said no nuclear weapons programmes. And yet they're constantly ignoring the demands,” said Mr Bush. “My view is that we need to strengthen our sanction regime.”

The US president said that he has already directed his Secretary of State Condoleezza Rice to work with European partners to "develop further sanctions" against Iran.

“And, of course, I will discuss this issue with (Russian) Vladimir Putin, as well as President Hu Jintao (of China),” said Mr Bush.

“The first thing that these leaders have got to understand is that an Iran with a nuclear weapon would be incredibly destabilising for the world. It's in their interests that we work collaboratively to continue to isolate that regime.”

Earlier on Thursday, Iran's president vowed to push ahead with his country's nuclear programme, claiming that countries like the US were trying to keep Iran from emerging as a world power.

Iran’s nuclear programme is not the only issue between the US and Iran as they prepare for Monday’s talks on ending the violence in Iraq.

In Washington, the Bush administration repeated its charge that the violence in Iraq is fuelled partly by Iranian arms supplies, funding and other support for Iraqi insurgents.

In Tehran, speaker of the Iranian parliament Gholam Ali Haddad Adel urged the United States to change its “pressure tactics.”

"If they show good intention, the result would be clear, but Americans are still insisting on continuing their pressures on Iran,” he said.

On Wednesday, the US Navy began its largest war games off the Iranian coast since the 2003 US-led invasion of Iraq, with two nuclear-powered aircraft carriers leading a flotilla of nine ships, dozens of combat aircraft and 17,000 sailors and Marines.

In an interview with Mexican TV news network Televisa, Iranian ambassador to Mexico Mohammad-Hassan Qadiri-Abyaneh described these exercises as provocative and cautioned that the result of a possible US attack against Iran would certainly be far from victory.

“On the contrary, this should be considered as the start of World War III," he added.

The envoy asked: “A major question is whether it is Iran which is threatening to wage war along US borders or it is the US fomenting tension along Iranian borders?” Meanwhile, US forces in Iraq continue to hold five Iranians they seized from a diplomatic facility in Irbil in the Kurdish zone.

Iran has detained three Iranian-Americans, among them Haleh Esfandiari, a leading Middle East expert at the Woodrow Wilson International Centre for Scholars in Washington, D.C.