Story highlights Ahmadinejad says "regional states" have little need to purchase arms

Iran's president calls Israel a mosquito, downplaying the prospect of war

Talks on Iran's nuclear program are set for next week in Austria, ahead of P5+1 talks

Iran's foreign minister recently said he's optimistic there will be progress

Ahead of upcoming nuclear talks, Iranian President Mahmoud Ahmadinejad downplayed the threat Israel poses to Iran, comparing it to an annoying bug.

"Israel is nothing more than a mosquito which cannot see the broad horizon of the Iranian nation," he said Saturday in northeastern Iran's Khorassan province, according to the semi-official Fars news agency.

Ahmadinejad said "regional states" were being duped into buying billions in arms from "arrogant and imperial powers," driven in part by all the talk surrounding a potential war involving Iran and Israel, the state-run Islamic Republic News Agency reported. Such military purchases, he said, are unnecessary because there is no war on the horizon between those two nations.

The Iranian president alluded to "rulers" who sold "their petrol" for $60 billion worth in arms, though he did not mention by name either the purchasing or selling country. Saudi Arabia is in the midst of a 20-year, $60 billion arms deal with the United States, including nearly $30 billion for F-15 fighter jets announced late last year.

Ahmadinejad has long questioned the existence of the Holocaust and, months after taking office in October 2005, he participated in a lengthy protest called "World Without Zionism" and has repeatedly derided Israel.

"With the force of God behind it, we shall soon experience a world without the United States and Zionism," he said then, according to another IRNA report.

On Saturday, while seemingly backing away from the potential for an armed conflict, Ahmadinejad hardly signaled that Iranians should or will embrace Israel.

He predicted Israel could fall if regional powers cut ties -- particularly by refusing to sell oil to Israelis.

Tensions have ramped up in recent years over Iran's controversial nuclear program. Iran claims it is being developed for peaceful means, while Western powers and Israel say they think Iran is evading international inspections and intent on developing nuclear weapons.

This sentiment has led to sweeping sanctions targeting Iran's economy, government and its leaders.

Israeli Prime Minister Benjamin Netanyahu has been a particularly harsh, persistent critic of Iran's leadership and nuclear program, with rumors circulating for months that Israel may pre-emptively strike nuclear sites in Iran and possibly set off a regional war.

And Iran's supreme leader, Ayatollah Ali Khamenei, last Friday "blasted the U.S. war-mongering rhetoric against Iran," including President Barack Obama's assertion that "all options are on the table." He added war "can be 10 times more harmful to" the United States than Iran, according to a Fars report.

Even with all the back-and-forth, there has been an apparent shift recently in the tone, and manner, of dialogue between the two sides.

EU foreign policy chief Catherine Ashton described nuclear talks last month in Istanbul, Turkey, between international and Iranian diplomats on nuclear matters as "constructive and useful."

And Iranian Foreign Minister Ali Akbar Salehi said last week that he was optimistic that there would be progress in continued talks with the United States, Russia, China, Germany, France and Britain -- the so-called P5+1, Fars reported.

Those parties are set to meet again May 23 in Baghdad.

Before then, discussions in Vienna, Austria, will be held on Monday and Tuesday to address "outstanding issues and remove ambiguities," Iran's envoy to the International Atomic Energy Agency Ali-Asghar Soltanieh said, according to Fars.