Iran's Rouhani at UN calls on rival Saudi to cease 'divisive policies'

By Parisa Hafezi and Michelle Nichols

UNITED NATIONS, Sept 22 (Reuters) - Iranian President Hassan Rouhani on Thursday called on regional rival Saudi Arabia to "cease and desist" from "divisive policies" if it was serious about regional peace and security.

Rouhani was addressing the United Nations General Assembly the day after Saudi Crown Prince Mohammed bin Nayef suggested Iran should be a better neighbor in the region and not interfere in the affairs of other countries.

The leading Shi'ite Muslim power, Iran and Sunni monarchy Saudi Arabia are both fighting Sunni militants of Islamic State, which controls parts of Syria and Iraq and has supporters and sympathizers worldwide who have carried out bombings and shootings of civilians.

"If the Saudi government is serious about its vision for development and regional security, it must cease and desist from divisive policies, spread of hate ideology and trampling upon the rights of neighbors," Rouhani said.

Saudi Arabia sees Iran as the paramount threat to the Middle East's stability, because of its support for Shi'ite militias that Riyadh says have inflamed sectarian violence.

Saudi Arabia cut diplomatic relations with Iran in January after Iranian protesters attacked Saudi diplomatic missions in Tehran and Mashhad following Riyadh's execution of a prominent Shi'ite cleric.

On Wednesday, the Saudi Crown Prince said Iranian authorities had "not lived up to their duty to provide adequate protection in accordance with the binding international agreements", according to the Saudi Press Agency.

LACK OF COMPLIANCE

In his speech, Rouhani criticized the United States for its "lack of compliance" with a landmark nuclear deal reached with six major powers and Iran in 2015 aimed at curbing Tehran's nuclear program in exchange for lifting sanctions.

Tehran has called on the United States to do more to remove obstacles to the banking sector so that businesses feel comfortable investing in Iran without fear of penalties.

Following a meeting of the six world powers and Iran on Thursday on the sidelines of the annual U.N. gathering of world leaders, the European Union's top diplomat Federica Mogherini said the common assessment was that the deal was being implemented.

However, she said Rouhani's concerns were discussed and there was a strong commitment to "accelerate the pace of it and ... to go the extra mile to continue working for the Iranian people to feel the real benefits in their everyday life."

"We have discussed the outreach we have done all of us collectively and individually to reach out to businesses, banks to encourage engagement in Iran," she told reporters. "It's a process that some of us might wish to see going a bit faster."

Major foreign banks are wary of doing business with Iran because of concerns that they could be caught up in restrictions applying to U.S. banks, which are still banned from doing business with Iran because of core U.S. sanctions that remain in force.

"The lack of compliance with the deal on the part of the United States in the past several months represents a flawed approach that should be rectified forthwith," Rouhani said.

He added: "Any failure on the part of the United States in implementing it (the deal) would constitute an international wrongful act and would be objected to by the international community," Rouhani said.

However, Rouhani said Iran had no problem with U.S. companies investing in the Islamic Republic's economy

"If American companies are willing to come and invest in Iran ... we have no problem with that. Iran has never had any problem with American companies to invest in Iran," Rouhani told a news conference later.