Iranian President Mahmoud Ahmadinejad said on Monday Western powers were wrong if they thought Iran would retreat under political pressure from its nuclear plans, even as the country faces possible sanctions.

Iran faces the prospect of penalties after its case was sent back to the U.N. Security Council for failing to heed a U.N. demand to suspend uranium enrichment, a process the West believes Tehran is using to develop atomic weapons.

France, Britain and Germany are drafting a Security Council sanctions resolution. But Iranian officials have shrugged off the threat, and say Iran will press ahead with its programme.

"They (the West) should know that taking advantage of nuclear energy is the demand of all the Iranian nation ... All the Iranian nation insists on this right and will not retreat one iota," Ahmadinejad said in a televised speech.

"Our leader is standing strong and sturdy and our nation is standing unified and consolidated," he said in a town on the southern edge of Tehran.

Iran's Supreme Leader Ayatollah Ali Khamenei has the final say in nuclear and other matters. But, like Ahmadinejad, he has also insisted Iran will not give up its atomic plans.

Iran, the world's fourth largest oil exporter, insists it wants to produce fuel for nuclear power plants and dismisses charges it wants nuclear weapons.

France, Britain and Germany have been discussing the draft resolution with the United States, which wants tough action. Russia and China, which can veto a U.N. resolution and are both major trade partners of Iran, are loathe to impose penalties.

Russian Foreign Minister Sergei Lavrov on Monday noted that so far there was no resolution before the Security Council and there was still the possibility of an agreement with Iran which would "open the way to negotiations".

Lavrov was speaking at a joint news conference with EU commissioner for external relations Benita Ferrero-Waldner.

Ferrero-Waldner said: "We do not want Iran to be a nuclear weapons state."

A senior Iranian official said Iran could not hold more nuclear talks with the EU if they were based on a pre-judged outcome and said Europe would "pay" if it abandoned its commitments.

Ali Larijani, Iran's chief nuclear negotiator whose comments were carried by the students news agency ISNA, held months of talks with EU foreign policy chief Javier Solana, who sought to coax Iran to heed the U.N. call for it to halt uranium enrichment.

Those meetings ended this month with no deal and Solana has said it is up to Tehran to decide if it wants talks to continue.

"We are committed to all our agreements with Solana. We are committted to these talks and their results. If the other side is not committed to the agreements, it should pay for that itself," Larijani was quoted by ISNA as saying.

It was not clear to which agreements Larijani referred.

European states say any measures against Iran will be incremental. Diplomats say steps are likely to initially target nuclear-related activities. Some European diplomats say a tough resolution could boost support for Ahmadinejad's conservative government.

"It (a tough resolution) would play right into the hands of the conservatives because they will have the perfect excuse for any economic failures," one European diplomat said.