Iran's president said on Wednesday his country would press on with its nuclear programme "until the end" and would not be stopped by the West, which fears the Islamic Republic is trying to build atomic bombs.

Mahmoud Ahmadinejad was speaking a day after the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), said in a report Iran was still stonewalling probes aimed at determining whether its plans are peaceful.

"The Iranian nation stands for its nuclear right and will go ahead until the end," Ahmadinejad said in a speech to a rally in western Iran, broadcast live on state television.

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"Time is on the Iranian nation's side. With each passing day, (the West) must retreat one step and acknowledge the rights of the Iranian nation and with each passing day the Iranian nation goes ahead towards the summits of victory," he said.

"By the grace of God, we will hold a great nuclear celebration before the end of this year, all over Iran," he said, without elaborating. The Iranian year ends in March 2007.

Iran, which says its nuclear program is solely for power generation, faces possible sanctions for failing to heed UNdemands to stop enriching uranium, a process that can yield fuel for power plants or, ultimately, for atomic bombs.

Ahmadinejad told a news conference on Tuesday Iran was aiming to build 60,000 centrifuges to enrich uranium. Iran now operates two experimental chains of 164 centrifuges each.

To date Iran has enriched only nominal amounts of uranium, not nearly enough for use as fuel, the IAEA report said.

It said Iran still needed to answer questions about its secrecy-shrouded nuclear plans and that UN inspectors had found unexplained traces of plutonium in samples of particles of high enriched uranium (HEU) at an Iranian atomic waste site.

In larger amounts, plutonium and HEU can set off atom bombs.

Iran's Atomic Energy Organisation said in a statement sent to IRNA that Iran and the IAEA "had a lot of expert discussions concerning the plutonium tests in the last three years."

"The source of that (plutonium) contamination is the old fuel from the Tehran research reactor, which has been under the supervision of the IAEA since the beginning of its work and this issue has been referred to the IAEA," it said.

The research reactor was in place before the 1979 Islamic revolution and was provided by the United States, which had close ties with Tehran before the monarchy was toppled.

A senior UN official said the IAEA had not yet evaluated Iran's explanation as it was received only on Monday. The amount of plutonium was minute and could have been a byproduct of legitimate civilian research, he said.

But information given earlier by Iran was inconsistent and the IAEA was awaiting test results on further samples taken in September "to really see if we have a problem or not".

Diplomats say IAEA inspectors retain normal access to Iran's declared nuclear activities. But they say Tehran is withholding answers to questions about alleged undeclared activity with military links as "bargaining chips" with world powers.

U.S. President George W. Bush and his Russian counterpart, Vladimir Putin, held brief talks in Moscow on Wednesday which were to include sanctions against Iran.

The United States has said it wants diplomacy to resolve the standoff but has not ruled out military action.