Manouchehr Mottaki said: "We're not going to use energy as a political leverage."

However, Mottaki also said that Iran would not give up its right to develop nuclear energy for civilian use, which he said was enshrined in the nuclear Non-Proliferation Treaty (NPT).

The recent decision of the International Atomic Energy Agency (IAEA) to pass Iran's nuclear dossier to the UN Security Council has raised fears that the world's fourth-largest oil exporter might retaliate by refusing to sell oil to the West.

Missile Test
   
Iranian state television said on Friday that the country's armed forces had successfully test-fired an Iranian-made missile that can evade radar.

Andy Oppenheimer, a weapons expert at Jane's Information Group, said: "Clearly it's escalation, and also an attempt by Iran to flex its muscles as it goes into a new phase of the diplomatic struggle with the UN Security Council."
 
But an Israeli defence expert said the missiles did not the match the description and sounded like the Russian Iskander-E missile.

Uzi Rubin, a former director of Israel's Arrow missile defence programme, said: "They could be bluffing."

'Critical situation'

Oil markets reacted swiftly to Mottaki's comments. The price of US light crude fell 78 cents to $66.37 per barrel, after rallying 4% in course of the week.

Mottaki also said Iran was willing to negotiate regarding only industrial-scale uranium enrichment. But Western nations have demanded Iran halt all enrichment, including small-scale research.

Britain, France and Germany ended more than two years of talks with Iran after it announced in January that it would resume enrichment work and shortly thereafter began small-scale purification of uranium.

Iran's former president, Akbar Hashemi Rafsanjani, said on Friday that the country's nuclear dossier should never have been transferred from the IAEA to the Security Council.

"It is not possible to wrongly accuse such a nation [Iran] ... and then send its dossier to the Security Council and drag the region step by step towards a critical situation," Rafsanjani said during a sermon.

Iran says it is interested in only nuclear power and does not want atomic weapons.