Iran's president launched a new phase in the Arak heavy-water reactor project today, saying Tehran would not give up its right to nuclear technology.

President Mahmoud Ahmadinejad was speaking just days ahead of a United Nations deadline for Iran to halt uranium enrichment or face possible sanctions.

'No one can deprive a nation of its rights based on its capabilities,' Ahmadinejad said in his speech to inaugurate the project.

The plant's plutonium by-product could be used to make atomic warheads.

The UN Security Council has demanded Iran meet the 31 August deadline to halt uranium enrichment, the part of Tehran's atomic programme which most worries the West.

Western nations accuse Iran of seeking to master technology to produce nuclear weapons. Iran, the world's fourth largest oil exporter, insists it only wants to produce electricity but Ahmadinejad said that 'Iran is not a threat to anybody, not even to the Zionist regime'.

Iran faces possible sanctions if it does not heed the UN deadline, but divisions among world powers over how to handle Iran could delay any action.

The US newspaper The Los Angeles Times said Washington had indicated it was ready to form an independent coalition to freeze Iranian assets and restrict trade if necessary.