"That should be a cold jolt to the rest of the world," State Department spokesman Sean McCormack said in response.

"What that leads to is an Iranian nuclear weapon, which would be an incredibly destabilizing event in the course of Middle East history," he said.

Iran has said it is looking to install 3,000 centrifuges by March 2007 and ultimately run 60,000 centrifuges -- compared to two cascades of 164 centrifuges apiece it has currently at its Natanz plant to enrich uranium on a research scale.

While Tehran insists its goal is civilian energy production, experts say that 50,000 centrifuges could produce 20 kilos (44 pounds) of weapons grade uranium in under a month.

A leaked report from the International Atomic Energy Agency (IAEA) in Geneva meanwhile said it was investigating traces of plutonium found in containers at a waste storage site in Iran.

The developments came as the United States was struggling to agree on the terms of a UN sanctions resolution with Britain, China, France, Germany and Russia. The six powers have been trying for months to entice Iran away from its nuclear ambitions.

Iran faces the sanctions for refusing to comply with an earler UN Security Council resolution demanding it freeze its uranium enrichment work.

Britain, France and Germany presented a draft resolution last month that focussed on nuclear- and ballistic missile-related sanctions and included travel bans and financial restrictions on Iranian scientists working on the nuclear and missile programs.

But the talks have bogged down with Russia, which has strong economic ties to Iran and is helping build the country's first nuclear reactor. Moscow says the measures are too tough and Washington believes they need to be tightened further.

The State Department's number two diplomat, Undersecretary of State Nicholas Burns, spoke with his five counterparts Tuesday in a bid to break the stalemate, McCormack said. But there were no signs of an imminent breakthrough.

US Secretary of State Condoleezza Rice is also expected to raise the issue with her Chinese and Russian counterparts on the sidelines of this week's meetings of the Asia-Pacific Economic Cooperation forum in Hanoi, he said.

McCormack said Ahmadinejad's boast and the IAEA report should "underscore the fact that we need a resolution in order to send a strong message to the Iranians that they need to change their behavior".

He said the failure of the six powers to come up with a sanctions resolution "is starting to become also a question of the credibility of the Security Council of whether or not it can follow through in forcing its own resolutions".

The Iranian president also proposed talks with Washington if the US changed its "attitude" towards Tehran, an overture immediately rejected by McCormack.

Related Links
Learn about nuclear weapons doctrine and defense at SpaceWar.com