President Mahmoud Ahmadinejad shrugged off the threat of UN action, which could see his country badly isolated and slapped with sanctions, and vowed to ignore even a long stream of tough resolutions.

On Saturday the International Atomic Energy Agency's 35-nation board voted to report Iran to New York amid fears the country is using a nuclear power drive as a cover for weapons development.

"You can issue as many resolutions as you like and have fun with it, but you cannot prevent Iran's progress," said the hard-line president, who has steered his country on a collision course with the West since his shock election win last June.

"You know that you cannot do anything. The era of bullying is over," he said of the West's determination to prevent Iran from acquiring nuclear fuel technology that can also be used to make the fissile core of a nuclear bomb.

Iranian FM says resolution removes possible of further diplomacy

Foreign Minister Manouchehr Mottaki meanwhile confirmed Iran had laid down the gauntlet with immediate retaliation. "All voluntary measures taken over the past two-and-a-half or three years have been halted and we have no further commitment to the additional protocol and other voluntary commitments," he told a news conference.

"This resolution has no legal basis. All it does is simply remove the opportunity for voluntary cooperation between Iran and the agency."

The additional protocol to the Non-Proliferation Treaty hands the IAEA stronger inspection powers and is central to the UN watchdog's now three-year-old effort to determine what Iran is actually up to.

Mottaki did not specify what other steps had already been taken, but Iran's voluntary measures had notably included a freeze on uranium enrichment.

Iran says it only wants to enrich uranium to make reactor fuel. It prompted the latest crisis by resuming uranium conversion activities last August and enrichment research on January 10.

US President George W. Bush, however, said the text "is not the end of diplomacy or the IAEA's role" and merely the "beginning of an intensified diplomatic effort."

"This important step sends a clear message to the regime in Iran that the world will not permit the Iranian regime to gain nuclear weapons," Bush said.

Russia favored by Iran as negotiator

Although Iranian retaliation is set to worsen tensions, the Islamic regime also signaled it was ready to press on with negotiations with Russia -- which now has a one month window to talk with Tehran before the Security Council actually takes up the matter.

Moscow's proposal is for enrichment to be carried out on Russian soil in order to allay proliferation concerns whilst at the same time allowing Iran to have nuclear fuel for civilian purposes.

"The second round of talks will go ahead, but the Russian proposal must be adapted to the new situation so that we can examine it," foreign ministry spokesman Hamid Reza Asefi told reporters.

The two sides are scheduled to meet in Moscow on February 16, with Russia keen to reach a negotiated settlement and guard its economic interests -- which include a one-billion dollar deal to build Iran's first reactor.

"I am sure that the Iranian leadership will look with all seriousness at Russia's proposal," Russian Defense Minister Sergei Ivanov said. "This suggestion is the best way out of the situation."

Widespread international pressure for Iran to comply

Iran is under massive pressure from elsewhere to comply with the IAEA's demands to return to a moratorium on fuel cycle work, show better cooperation with IAEA inspectors and return to negotiations.

In the IAEA vote, 27 countries including the UN Security Council's permanent five -- Britain, China, France, Russia and the United States -- voted in favor and five abstained. Iran's only support came from Cuba, Syria and Venezuela.

Japan also said the resolution was "a clear message to Iran", and called on the Tehran to "take this resolution seriously and respond to it sincerely."

"Iran has still a crucial opportunity between now and the March IAEA Board to comply," said British Foreign Secretary Jack Straw. "Otherwise, decisions by the Security Council are almost inevitable."