The problems Iran is currently facing as a result of economic sanctions led a defiant Mahmoud Ahmadinejad to front a press conference on Tuesday in the capital, Tehran. His comments follow a sharp slide in the value of Iran's currency, the rial, which lost 17 percent of its value against the US dollar on Monday, and closed down a further four percent on Tuesday.

An economic "war" being waged by the West was behind the plunge, said Ahmadinejad, who insisted the country could ride out its troubles.

"We are not a people to retreat on the nuclear issue," he said. "If somebody thinks they can pressure Iran, they are certainly wrong and they must correct their behaviour.

"Enemies have managed to reduce our oil sales but hopefully we will compensate for this." The sanctions have severely limited the number of markets Iran can export oil to.

The US Treasury is monitoring the sanctions against Iran and says they are the most severe ever. It believes Iran's foreign earnings have been reduced by about $5 billion a month (3.86 billion euros) as a result.

"These are the most punishing sanctions we have ever been able to amass as an international community and they are very important for trying to get Iran's attention on the important denuclearization work," said US State Department spokeswoman Victoria Nuland, on Monday.

Watch video 01:04 Iran's currency in crisis

Ahmadinejad has further troubles at home. Following a recent trip to the United Nations in New York, in which he hinted Iran could consider negotiating with the US on the nuclear issue, he was criticized in his own country for opening up that possibility. On Tuesday, Ahmadinejad backtracked from those remarks.

Several western countries, most notably Israel and the US, accuse Iran of seeking nuclear weapons, while Ahmadinejad's government says the program is for peaceful purposes only.

The financial troubles in Iran have resulted in many citizens rushing to change their savings into hard currency. This has been behind the fall in the rial.

"This is going to cause a shutdown in transactions in Iran. All the main distributors of electronics and household items will be concerned about trading - they'll want to know where the bottom is and how long it will continue," said economic advisor to the EU, Mehrdad Emadi.

jr/msh (AFP, Reuters)