"Our first priority is our missile capability and we must enhance it... given the enemy's efforts in missile defence," said Amir Hatami in an interview on television late Saturday, according to Tasnim.

He added that a new fighter jet "will fly on National Defence Industry Day", which falls on Wednesday.

Hatami said the defence programme was motivated by memories of the missile attacks Iran suffered during its eight-year war with Iraq in the 1980s, and by repeated threats from Israel and the United States that "all options are on the table" in dealing with the Islamic republic.

"We have learned in the (Iran-Iraq) war that we cannot rely on anyone but ourselves. We saw that wherever we are not capable, no one will have mercy on us," he said.

"Our resources are limited and we are committed to establishing security at a minimum cost.

"We upgrade our missiles according to our enemies' threats and actions, as a deterrent and to give a crushing response to the enemy," he added.

Hatami added that regional rival Saudi Arabia "has the largest military budget in the world after America and China... while our defence budget is limited".

"What would any nation with such a situation and past do in our place?" he said.

The defence minister dismissed the idea of an "Arab NATO" -- an old concept that has recently resurfaced as Washington tries to push regional countries to accept a greater share of their defence.

"Arab NATO is part of the game of creating discord by the enemy and it's not worth paying attention to," said Hatami.

"It is unlikely that America and the Zionist regime (Israel) allow Muslim countries to come together. They know well that the aim of Muslim nations is to destroy the Zionist regime and defend Palestine," he added.