TEHRAN: Iran's supreme leader Ayatollah Ali Khamenei on Sunday denied the West's charge that Tehran aims to develop nuclear weapons under a covert programme, insisting the Islamic republic bans such activity.

"They falsely accuse the Islamic republic of producing nuclear weapons. We fundamentally reject nuclear weapons and prohibit the production and the use of nuclear weapons," Khamenei said in a speech broadcast by state television.

"They know themselves that it's not true ... but it is part of Iran-phobia policy that controls the behaviour of these arrogant governments today."

The comments came ahead of a meeting in two weeks between Iran and six world powers which have demanded Tehran halt its programme of uranium enrichment -- a process which can be used to make material for an atomic bomb.

Iran has so far defied the demand, insisting its programme is for peaceful nuclear energy. It denies accusations by the United States, European powers and Israel that it is covertly seeking to build a nuclear weapon.

The comments by Khamenei, the country's all-powerful leader, came after US Secretary of State Hillary Clinton said on Tuesday that Iran must answer "head on" concerns about its nuclear programme at the meeting with world powers.

The Iranian leader demanded that the West revise its policy.

"They must correct this. The Iranian nation is alert. They see and understand animosities and stand against them. The Islamic republic will not retreat."

Iran's talks are scheduled for October 1 with the United States, Russia, China, Britain, France and Germany. The European Union expects the meeting to take place in Turkey.

Britain's Foreign Secretary David Miliband said on Sunday that Iran must take "concrete steps" to end Western suspicion it is seeking to develop nuclear weapons.

"The Iranian issue is now a clear one and it needs to be addressed alongside the North Korean issue," he told Sky Television in an interview.

"It's time for concrete steps by Iran to show that they are willing to live within the rules of the non-proliferation treaty that has been so important in limiting the nuclear proliferation over the last 40 years."

Miliband also said he would meet counterparts from the other five world powers dealing with Iran in New York this week.

Khamenei, meanwhile, speaking two days after the annual Quds (Jerusalem) Day on which Iran held a rally cross the country, referred to Israel as a "counterfeit government."

But he denied that Iran -- a staunch supporter of the Palestinians -- was seeking a military solution to the Middle East conflict.

The supreme leader stressed it was a "lie ... claimed by Western media that Iran is attempting to destroy the Zionist regime (Israel) by military equipment."

"The Islamic republic has proposed a reasonable, logical and humane plan" the leader said, referring to its proposed referendum to decide on the future of Israel, the Gaza Strip and West Bank.

Iran has in the past boasted of test-firing ground-to-ground missiles with a range of almost 2,000 kilometres (1,350 miles), enough to strike Israel.

Russian President Dmitry Medvedev said in an interview with CNN released on Sunday that Israeli President Shimon Peres assured Russia that Israel is not planning to attack Iran.

"When Israeli President Peres was visiting me in Sochi recently, he said something very important for all of us: 'Israel does not plan any strikes on Iran, we are a peaceful country and we will not do this'," Medvedev said.