China on Tuesday expressed optimism that negotiations could still resolve the dispute, calling on Tehran to cooperate.

Iran's hardline President Mahmoud Ahmadinejad addresses Iranian ambassadors based abroad during a meeting in Tehran. Ahmadinejad defended his country's controversial nuclear program in the face of heightened US pressure ahead of an expected UN Security Council showdown. [AFP]

"Now there is still room to solve the Iranian nuclear issue through diplomatic negotiations," said Chinese Foreign Ministry spokesman Qin Gang. "We hope Iran can cooperate closely with the International Atomic Energy Agency and do more to build up mutual confidence to help reach a solution."

But Iran's president said Iraq would not abandon its drive to produce nuclear fuel by what he called the harsh statements and pressures by Washington and its allies.

"Rest assured that the technology to produce nuclear fuel today is in the hands of the youth of this land and no power can take it back from us," Ahmadinejad said in a speech attended by thousands in northern Iran. The crowd responded with chants of "nuclear energy is our right."

The United States and its allies, he said, are angry because Iran has made progress in its nuclear program.

"Today, unfortunately, few big powers want, through coercion and bullying, prevent progress of nations... They are really angry that this great nation (Iran) is gaining access to the peaks of progress and development."

British Foreign Secretary Jack Straw warned Monday that Iran's government is taking the country in the "wrong direction," repressing its own people and pursuing confrontation abroad.

Britain, France, Germany and the United States successfully pressed the U.N.'s nuclear watchdog, the International Atomic Energy Agency, to report Iran to the Security Council last week after Tehran resumed nuclear research and small-scale uranium enrichment.

Iran has insisted it will never give up its right under the Nuclear Nonproliferation Treaty to enrich uranium and produce nuclear fuel. It restarted research-scale uranium enrichment last month, two years after voluntarily freezing the program during talks with Germany, Britain and France.

It also has threatened to start large-scale uranium enrichment if the council imposes any sanctions on the country. Iran only has an experimental nuclear research program and scientists say the Muslim nation is months away from resolving technical problems to launch any large-scale uranium enrichment.

Last week, Iran offered what it called a "final proposal" to agree to suspend large-scale enrichment temporarily in return for IAEA recognition of its right to continue research-scale enrichment.