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Iran yesterday dismissed reports that Israel had been practising for air strikes against its nuclear drive as "psychological operations" but warned of a limitless response to any attack.

The New York Times on Friday cited US officials as saying that a major Israeli military exercise over Greece earlier this month appeared to be a dry run for a potential strike against Iranian nuclear facilities.

"It seems that a series of psychological operations have been taken to intimidate the Islamic republic and force it to renounce its absolute and legitimate right" to nuclear power, Defence Minister Mostafa Mohammad Najar said.

"But Iran will not be intimidated by these threats and will not renounce its right," he added, quoted by the Fars news agency.

The United States and its ally Israel fear that Iran could use its programme of uranium enrichment to make an atomic weapon, and have never explicitly ruled out launching a military strike against it.

An official with the Greek air force's central command confirmed the substance of the report, stating that it had taken part in "joint training exercises" with Israel off the Mediterranean island of Crete.

"Iran will not begin any conflict but will punish any aggressor with force. With determination and using all the options -- without limit in time and space -- we will give a destructive response to any hostile action," Najar said.

His comments came after the UN atomic watchdog chief Mohamed ElBaradei warned on Saturday that an attack on Iran would turn the region into a "ball of fire.

Israeli parliament foreign affairs and defence committee chairman Tsahi Hanegbi said on Saturday that Western diplomatic efforts to halt Iran's nuclear programme had failed and "next year and the year after that will be crucial.

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