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Iranian President Mahmoud Ahmadinejad lashed out again at Israel on Thursday, saying that it won't survive in any shape or form.

Speaking to reporters, the hard-line leader smirked at a former mantra of the Israeli right of a Greater Israel that would include Palestinian territories. The idea has since been abandoned, with Israeli consensus now that there will be a Palestinian state alongside Israel.

Earlier this week, Prime Minister Ehud Olmert said that the idea of a Greater Israel, which includes the Gaza Strip and the West Bank, is a thing of the past, and that anyone who still thinks in this way is delusional.

Ahmadinejad said that "while some say the idea of Greater Israel has expired, I say the idea of a Lesser Israel has expired, too."

The press conference was an opportunity for Ahmadinejad to speak to the media at length before traveling to New York to attend the United Nations General Assembly.

The Iranian president repeated his previous anti-Israel comments, calling the Holocaust by Nazi Germany during World War II a fabrication and saying that Israel is perpetrating a holocaust on the Palestinian people.

The remarks appear to be part of Ahmadinejad's effort to deflect growing criticism at home over failed economic policies and recent comments by some close associates. Iran's inflation hit 27.6 percent last month, while Vice President Esfandiar Rahim Mashai was recently quoted as saying Iranians were friends of all people in the world - even Israelis.

Ahmadinejad, known for virulent anti-Israeli rhetoric, said in 2005 that Israel should be wiped off the map and later called the Holocaust a myth. Most recently, he described the Jewish state as a germ of corruption.

Speaking about Iran's controversial nuclear program, Ahmadinejad claimed the UN nuclear watchdog agency has no right to consider documents provided by the U.S. alleging that Tehran sought to make an atomic bomb.

Ahmadinejad said regulations under which the International Atomic Energy Agency operates do not allow it to act on claims by any government. On Monday, an IAEA report said Iran had blocked a UN investigation into allegations it tried to make nuclear arms and that the inquiry was deadlocked.

Ahmadinejad said the report verified the peaceful nature of Iran's nuclear program, which Tehran says is only for electricity production, and urged the West to end its hostile policy toward Iran.

Iran is already under three sets of sanctions by the UN Security Council over its refusal to suspend uranium enrichment. Ahmadinejad on Thursday insisted the enrichment would not be stopped.

"Let them put sanctions on us, Ahmadinejad said. We are a very strong nation," he said.

The United States and its allies are expected to press the UN for a new round of sanctions after Iran refused to accept a recent package of economic and technological incentives in return for suspending enrichment.

Iran denies U.S. claims that it is seeking to build a nuclear weapon, and insists that it has the right under the Nuclear Nonproliferation Treaty to develop reactor fuel using enrichment.

Iranian official: Our missiles can reach ships in Persian Gulf

A top adviser of Iran's supreme leader has declared that in the event of war no ship passing through the oil-rich Gulf region would be beyond the reach of the country's missiles, a government newspaper reported on Thursday.

Iran, embroiled in a standoff with the West over its nuclear ambitions, has said it could respond to any military attack by closing the strait at the southern end of the Gulf through which about 40 percent of the world's traded oil passes.

The United States, whose Fifth Fleet is based in the Gulf state of Bahrain, has vowed to keep shipping lanes opened.

The West accuses Tehran of seeking to build nuclear warheads but Iran, the world's fourth largest oil producer, insists its aim is to master technology to make electricity. Washington has not ruled out military action if diplomacy fails to end the row.

"At a time of war no ship can pass through the region of the Persian Gulf without being in the reach of the Revolutionary Guards' coast-to-sea missiles," Yahya Rahim-Safavi, a senior military adviser of Supreme Leader Ayatollah Ali Khamenei, was quoted by the Iran daily as saying.

Rahim-Safavi earlier this week said Khamenei had put the elite Guards in charge of defending the Gulf against any enemy attacks and that they would not hesitate to "confront foreign forces."

The comments came amid persistent speculation about a possible U.S. or Israeli strike on Iran's nuclear facilities.

Iran has dismissed reports of possible U.S. or Israeli plans to strike the country, but says it would respond by attacking U.S. interests and Israel if any such assault was made.

Iran's air force and defence units held war games this week to test equipment and boost readiness, Iranian media reported.

Alongside the regular army, Iran has a Revolutionary Guards force viewed as guardians of the Islamic ruling system.

The Guards have a separate command and their own air, sea and land units. They are deployed on sensitive border regions and guard key institutions and their arsenal includes the Shahab-3 missile, which reports say can reach targets in Israel.