Hours after a bristling US armada led by two aircraft carriers steamed into waters near Iran for exercises Wednesday, Iran defied the threats and pledged that its controversial atomic programme was expanding.

"The enemies aim to prevent us from using peaceful nuclear technology, not for scientific reasons but because they want to eradicate the roots of the principles of the Islamic Republic," Iranian President Mahmoud Ahmadinejad said Thursday.

"With God's help and power we are getting closer to our final aims because the enemy is exerting its last pressure on the Islamic republic and it will have no result," he said.

A day earlier, the UN nuclear watchdog said Iran was defying UN Security Council demands to stop enriching uranium and was expanding the work, leading the way for world powers to discuss a new sanctions package.

The International Atomic Energy Agency (IAEA) said that Iran continues to enrich uranium, which can provide fuel for civilian reactors but also make nuclear bombs.

That prompted warnings from US officials of further UN punishment unless Iran curtails its nuclear development, which the Islamic republic insists is devoted to civilian energy.

"Iran is once again thumbing its nose at the international community," US Under Secretary of State Nicholas Burns said, even as US and Iranian envoys prepared for historic talks on Iraqi security in Baghdad next Monday.

Iran denied obstructing IAEA inspections, but White House national security spokesman Gordon Johndroe said the report by the UN atomic watchdog was damning.

The IAEA assessment "is a laundry list of Iran's continued defiance of the international community and shows that Iran's leaders are only furthering the isolation of the Iranian people," he said.