A defiant Iran sharply escalated tensions with the West yesterday by sentencing a former US marine of Iranian descent to death for allegedly spying for the CIA.
The court ruling came as western diplomats confirmed reports that Tehran has begun uranium enrichment at an underground bunker near the city of Qom.
Abroad, Iran tweaked the American lion's tail as the president, Mahmoud Ahmadinejad, basked in the international spotlight on a controversial tour of leftist Latin American countries at odds with Washington.
Arizona-born Amir Mirzai Hekmati, 28, was found guilty of "co-operating with a hostile nation … and trying to implicate Iran in terrorism".
The US condemned the sentence, saying he was falsely accused and demanded his immediate release.
"We have seen Iranian press reports that Mr Hekmati has been sentenced to death by an Iranian court. If true, we strongly condemn such a verdict and will work with our partners to convey our condemnation to the Iranian government," said the National Security Council spokesman, Tommy Vietor.
Mr Hekmati's family has insisted he travelled to Iran to visit his grandmothers and was not a spy.
Mr Hekmati has 20 days to appeal. He was arrested several months ago but his capture was only confirmed by Iran in December after a single, closed-court trial during which the prosecution mainly relied on a televised "confession".
Tehran said he worked for the US military and intelligence services in Iraq and Afghanistan before being sent to Iran on a mission to feed misinformation to Iranian agents.
In his supposed confession, Mr Hekmati said he worked for a New York-based video game company designing games to manipulate public opinion in the Middle East on behalf of US intelligence.
His mother, Behnaz, and father, Ali, said they were "shocked and terrified" by the death sentence after a process "that was neither transparent nor fair".
Analysts doubt Mr Hekmati will be executed. It is more likely he will be used as a pawn in Iran's nuclear stand-off with the US.
His trial took place as the US announced new, tougher sanctions against the Islamic republic over its nuclear programme, which Washington believes Tehran is using to develop an atomic weapons capability, a charge Iran dies.
Iran has threatened to close the strategic Strait of Hormuz if the US and European Union sanction its oil exports, which underpin the Iranian economy. A third of the world's tanker-borne oil passes through the narrow waterway at the mouth of the Gulf.
The US defence secretary, Leon Panetta, warned on Sunday that any such move would cross a "red line" and "we would take action to reopen the strait".
Britain also has warships stationed in the Gulf to ensure the passageway remains open.
Meanwhile, Mr Ahmadinejad met in Caracas with his Venezuelan counterpart, Hugo Chavez, a fellow anti-US, populist firebrand and his closest ally in what the Iranian president calls America's "backyard".
Today, Mr Ahmadinejad is due in Nicaragua to attend the inauguration of its recently re-elected president, the former Sandinista leader Daniel Ortega. Stops in communist Cuba and Ecuador will round off his five-day foreign jaunt.
The Obama administration has portrayed Mr Ahmadinejad's Latin American tour as a sign of Iran's "desperation" to find new friends as increasingly punitive sanctions isolate Tehran.
Conspicuously absent from his itinerary is Brazil, Latin America's economic and diplomatic powerhouse, which gave him a warm welcome during a visit in 2009.
But Brazil's president, Dilma Roussef, has adopted a cooler approach to Iran than her predecessor, Luiz Inacio Lula da Silva.
Even so, Washington has shown it is concerned - it warned Mr Ahmadinejad's hosts not to expand economic or security ties with Iran.
Mr Chavez responded by declaring that Latin America would never bow to dictates from the "imperial Yankee".
A frequent flyer to the region, the Iranian president has long courted leftist and anti-US Latin American leaders since first assuming power in 2005. It was his fifth trip to Venezuela, while Mr Chavez has visited Iran nine times during his 13-year presidency.
Mr Ahmadinejad is accompanied by trade, energy and commerce officials, underscoring US concerns that his excursion is aimed at undermining sanctions.
The Wall Street Journal described his expedition as "a feel-good tour among friends", while a senior Republican legislator, Ileana Ros-Lehtinen, likened it to a "tour of tyrants".
As he left Iran on Sunday, Mr Ahmadinejad hailed Mr Chavez as a "hero in the struggle against oppression" and said Mr Ortega was leading a "revolution [that] is the same as the Iranian revolution".
He also praised Ecuador's ruling "revolutionaries" for battling the US "regime of domination".
Mr Ahmadinejad will hope his trip shows voters he still has international clout and is not, as his critics claim, a lame duck. He is under increasing fire from rival hardliners at home determined to stop his supporters making gains in pivotal parliamentary elections in March.
He is also vulnerable over Iran's economy. The national currency plunged to record depths this month as Tehran braces for western sanctions targeting its central bank and vital oil exports.
With additional reporting by Agence France-Presse