TEHRAN, April 30 Iran's Supreme Leader Ayatollah Ali Khamenei on Wednesday dismissed as enemy propaganda criticism of the government for failing to rein in double-digit inflation and said it was tackling Iran's economic problems.
The Islamic Republic's highest authority also made clear Iran would not back down in a nuclear row with the West and said international sanctions had failed to harm the world's fourth-largest oil exporter.
The U.N. Security Council has slapped three rounds of sanctions on Iran since 2006 for refusing to stop work the West fears is aimed at making bombs. Tehran rejects the charge.
"We are not afraid of Western sanctions," Khamenei told a mass rally in the southern city of Shiraz. Referring to three decades of various U.S. sanctions, he said: "Was the Iranian nation harmed? Never ... We used sanctions for our progress."
Iran has regularly brushed off the economic impact of sanctions but analysts say they are deterring investors.
But the government of President Mahmoud Ahmadinejad has come under mounting criticism from the media and parliament for steadily climbing inflation of more than 20 percent, which economists blame on profligate spending of petrodollars.
Khamenei said the West was struggling with more economic difficulties than Iran, with a "crisis" spreading from the United States to Europe, and inflation was a widespread problem.
He said Iran's "enemies" were using all political and financial means to break the will of the Iranian nation, which he said was "standing up" despite the pressure.
"If you now look at the analysis of foreign (media) you see that one of the main things that they want to use in their propaganda are economic issues," he told the crowd.
But, Khamenei said, "it is wrong to make it look like ... the issue of high prices is because of government officials and officials of different bodies are not paying attention ... they are completely paying attention and know what is happening."
Conservatives retained their grip on parliament in a March election, but analysts say deputies are expected to be more vocal in criticising Ahmadinejad ahead of a presidential election in 2009, when he is expected to stand for re-election.
Khamenei, who has final say on nuclear and other key policy areas and has previously praised Ahmadinejad's performance, said the government and parliament shared responsibility for overcoming economic hurdles.
Iranians should consume less and save more, he said.
"With the guidance of the country's official bodies ... the Iranian nation despite all the problems that global enemies are trying to impose on it will be able to overcome them," he said. (Writing by Fredrik Dahl; Editing by Dominic Evans)