The President of Iran, Mohammad Khatami has described the United States policy of setting-up a Persian language service on its Radio Free Europe as an ugly and malicious act.

Mr Khatami said American leaders were making conciliatory speeches towards Iran, but were failing to back them up with action.

He was speaking on the anniversary of the takeover of the American embassy in Teheran in 1979 by militant students.

Earlier thousands of demonstrators gathered in Teheran, chanting anti-American slogans and burning the US flag to mark the anniversary.