"If we witness a fundamental change in American policies, a new situation will prevail," Khatami said on Sunday after a reception for visiting Austrian President Thomas Klestil.

"We have no enmity towards anyone but we also expect that others do not make enmity towards us," the official IRNA news agency quoted the president as saying.

On Saturday, US Vice President Dick Cheney urged Iran's Islamic regime to bow to its people's demands for democracy and live up to its commitments not to develop nuclear weapons.

Democracy calls

Speaking to the World Economic Forum, Cheney called on Iran's conservatives, locked in a dispute with the reformist government over the eligibility of thousands of candidates for next month's parliamentary elections, to "follow the example" of other Middle East states seeking democratic reform.

"We call for the Iranian regime to honour the legitimate demands of the Iranian people"

Dick Cheney,
Vice-President, USA

"We call for the Iranian regime to honour the legitimate demands of the Iranian people," Cheney said. "There are growing calls for true democracy and human rights."

Washington has had no diplomatic relations with Iran since US embassy staff were held hostage for 444 days after the 1979 Islamic revolution.

Shortly after the 11 September 2001 attacks, President George Bush declared Iran, along with North Korea and Saddam Hussein's Iraq, part of an "axis of evil" for their alleged support of international terrorism.

However late last year, Bush temporarily waived US sanctions against Iran to allow aid to be sent after a devastating earthquake in the southeast of the country.