But in the first news conference since his election win sent shockwaves around the world, the ultra-conservative Ahmadinejad said Iran had a right to pursue its nuclear activities and insisted it did not need ties with arch-enemy the United States.

Foreign governments had expressed worry over the election of the austere hardline Tehran mayor, particularly concerning Iran's nuclear programme, and Ahmadinejad was at pains to present a conciliatory face to the world.

"Moderation will be the main policy of the government of 70 million people. There will be no place for extremism," he told hundreds of reporters packed into Tehran's town hall.

"This government will be a government of friendship and compassion. This government will be a government of justice and fairness, in the service of the people... whatever views they have."

But the 49-year-old president-elect, who looked perfectly relaxed under the media spotlight, signalled he had no interest in resuming dialogue with the United States. Tehran and Washington cut off relations after the Islamic revolution a quarter of a century ago.

"Iran is on a path of progress and elevation, and does not really need the United States on this path," he said, promising only to "work with any country in the world that does not show animosity to Iran."

A possible resumption of dialogue was floated by his defeated rival, the moderate conservative Akbar Hashemi Rafsanjani, a former two-term president previously seen as the regime's de facto number-two after supreme leader Ayatollah Ali Khamenei.

In the most stunning political upset in Iranian history, Ahmadinejad trounced Rafsanjani, a veteran of Iran's theocracy, in Friday's second-round run-off with 61.69 percent of the vote - effectively slamming the door on any immediate moves for a rapprochement with Washington.

Rafsanjani has reacted furiously to his defeat, accusing regime hardliners of spending tens of millions of dollars to manipulate voters.

Ahmadinejad also moved to make reassuring noises about Iran's nuclear policy. The country is suspected of using an atomic energy drive as a cover for weapons development.

"Today we can say that nuclear technology is our right, to be used for peaceful purposes," said Ahmadinejad, who takes over from outgoing reformist President Mohammad Khatami on August 3.

He pledged that negotiations with Britain, France and Germany aimed at showing that Iran's nuclear programme is peaceful would continue, but he also called on Europe to prove its cooperation.

"Based on the national interests of the Islamic republic of Iran, we will continue negotiations. But trust must be mutual," he said. He said his foreign policy would be marked by "justice... cooperation and mutual understanding."

European leaders urged Ahmadinejad to move quickly and prove that Iran's nuclear programme was peaceful. But the Iranian foreign ministry instead replied that the election would strengthen its position in negotiations.

Underlining the enmity between Iran and the United States, US Defence Secretary Donald Rumsfeld dismissed the elections as a "mock" vote and slammed the disqualification of over 1,000 candidates in pre-vote vetting by the hardline Guardians Council.

"I don't know much about this fellow," Rumsfeld said of Ahmadinejad. "But he is no friend of democracy. He's no friend of freedom."

The president-elect sought to reassure investors in Iran's fledgling stock market, which he said would grow stronger under his rule.

He also said he would try to increase foreign and domestic investment in the country by streamlining bureaucratic procedures -- but reaffirmed the new government would seek to give priority to domestic firms in the awarding of oil contracts in the OPEC cartel's number-two producer and exporter.

"Fighting bureaucratic and financial corruption is a definite policy of the next government," he added.

A deeply religious conservative, Ahmadinejad paid homage at the shrine of Iran's revolutionary leader Ayatollah Ruhollah Khomeini as one of his first acts since being elected.

Although he will be the first non-cleric to hold the presidency for 21 years, opponents have accused him of seeking to impose hardline religious puritanism on Iran and enforce strict dress codes and segregation for women.

The mayor's team has vehemently denied he is an extremist.

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