"Today, the Iranian nation demands the full use of nuclear energy and this is the demand of all Iranians, in every city and village, young and old. All Iranians stand by this and will not retreat even an inch," Ahmadinejad said in a speech broadcast live on state television.
His comments came as Britain, France and Germany draw up a draft sanctions resolution to put to the UN Security Council after Iran refused to obey repeated deadlines to suspend uranium enrichment.
Western countries fear Iran is secretly trying to build nuclear weapons, but the Islamic republic insists its programme is solely aimed at generating energy.
"Iranians will stand firm until we reach our nuclear goal and there is only one more step to go," he said in his address in Ray, a town south of Tehran.
While Western nations on the Security Council are pushing for tough sanctions, Russia and China -- which both have strong economic ties with Iran and are traditionally reluctant to use sanctions as a diplomatic tool -- are likely to oppose a severe regime.
A first set of punitive measures would likely focus on banning the supply of material and funding for Iran's ballistic missile and nuclear programmes. Other steps could include asset freezes and travel bans on nuclear scientists.
Iranian government spokesman Gholam Hossein Elham played down the consequences of possible sanctions, saying Monday: "The economic situation is in favour of the Islamic republic and there is no concern."
He told reporters that the threat of sanctions on Iran -- a major OPEC oil exporter -- was "psychological warfare" by the major world powers and that the nation was in a "very influential position" on the international scene.
On Sunday, Tehran had warned it would take "appropriate measures" in retaliation for any punitive action over its nuclear work.
Asked if any repercussions would have an effect on the Strait of Hormuz, a vital channel for transporting oil out of the Gulf, foreign ministry spokesman Mohammad Ali Hosseini said: "It depends on the kind of sanctions."
Iran's oil industry is likely to come under further pressure over falling oil prices and a recent OPEC decision to cut its quota by 1.2 million barrels per day, consequently decreasing the member countries' oil income.

Copyright AFP (Agence France-Presse), 2006