Shortly after Iran gave its reply regarding the E.U. incentives package, Iran announced the inauguration of several plants for heavy water production in Arak, and conducted an extensive-call-up military drill, named "Zarbat-e Zol Faqar," which began on August 22, 2006. 
Statements by senior Iranian officials on the occasion of the inauguration of the heavy water plants in Arak emphasized that Iran does not pose a threat to any other nation, Israel included.
On the other hand, several Iranian officials stated that there is a possibility that Iran's nuclear technology will allow it to manufacture an atomic bomb, and that the West's efforts and empty promises would not deter it from realizing its goals.
The following are excerpts:
Statements on Iran's Not Posing a Threat
*Iranian President Mahmoud Ahmadinejad: "Iran is Not a Threat to any State, Not Even to the Zionist Regime"
At the inauguration of the heavy water plants, on August 26, 2006, Iranian President Mahmoud Ahmadinejad emphasized that the plants were meant for civilian use and that Iran does not pose a threat to any country, not even to Israel. He said: "Iran is not a threat to any state, not even the Zionist regime, which is definitely an enemy of the countries in the region."
President Ahmadinejad declared that the Iranian nation has never succumbed to tyranny and will never succumb to it. "They can impose difficulties and hardship [on us] through use of force, but can anybody block a nation’s path to intellectual and scientific progress? Peace, friendship and kindness are among the characteristics of the Iranian nation. Different nations and ethnic groups [living in lands bordering] Iran have lived in peace and quiet for centuries without encountering any aggression on the part of Iran. Making progress is the right of the Iranian nation. No country should be deprived of its rights." He also said that the Iranian people would defend their rights "with force." 
Iranian Foreign Ministry Spokesman Hamid Reza Asefi reiterated Ahmadinejad's words on August 27, 2006: "...Iran will not initiate any attack whatsoever. President [Ahmadinejad] said in Arak that we do not pose a threat to any state, not even to the Zionist regime..." 
*Kazem Jalali, Rapporteur of the Iranian Majlis Foreign Policy and National Security Commission: "Iran Does Not Want Innocent People, Even in Tel Aviv, to Be Exposed to Injury or Harm"
Kazem Jalali, rapporteur of the Foreign Policy and National Security Commission in the Iranian Majlis, said at a press conference: "If Iran were to obtain an atomic bomb one day, against whom would it want to use it? Iran does not want innocent people, even in Tel Aviv, to be exposed to injury or harm, and it certainly does not want [to hurt or harm] them itself..." 
Statements on Iran's Right to Develop Nuclear Weapons
*Deputy Speaker of the Iranian Majlis: "The People May Ask the Government to Manufacture Atomic Weapons; Any Attack on Iran Will Be Met With a Forceful Reaction by All the Muslims in the World"
Sharif News, a news site run by the Tehran Technological University, posted statements by Majlis Deputy Speaker Mohammad Reza Bahonar, who also serves as secretary-general of the Iranian Islamic Engineers' Association. Bahonar emphasized that the Iranian people may ask their government to manufacture atomic weapons, and threatened that Iran would respond forcefully to any violation of its sovereignty. Following are excerpts from the post:
"Mohammad Reza Bahonar, secretary-general of the Islamic Engineers' Association, addressed the unreasonable efforts being made by the West in order to deny the Iranian people's right to nuclear technology, and [said]: 'Enough with the unreasonable pressures regarding the nuclear issue. There is a limit to the forbearance of the Iranian people... The Iranian people refuses to relinquish its right to benefit from advanced human knowledge, and the country's leaders have no right to relinquish the Iranian people's right to acquire nuclear technology.
"'...The West must accept that Iran is a regional power, and it cannot be ignored... There is a limit to the forbearance of the Iranian people, and if they [i.e. the West] overstep this limit, then our people, who have become very suspicious regarding the good intentions of the West, will compel the Majlis to ratify Iran's withdrawal from the NPT [the Nuclear Non-Proliferation Treaty]...
"'The Iranian people is faced by unreasonable forces that possess nuclear weapons, and there is no [force] that can deter them. If they put pressure [on Iran], the [Iranian] people may ask the government to produce nuclear weapons for the sake of deterrence...'
"Addressing the Western countries, Bahonar said: you need to fear the day that the Iranian people will amass in the streets, demonstrate, and ask its government to produce nuclear weapons in order to counter the threats...
"Bahonar said that the Zol-Faqar [military] drill has shown that Iran is determined to defend itself against any encroachment, and is determined to cut off the hand of any invader [even] before that hand is extended [to invade it]... The Iranian armed forces' impressive ability to operate advanced weaponry with significant deterrence capabilities is worthy of praise. Any attack on Iran will be met with a forceful reaction by all the Muslims in the world." 
It should be noted that Iranian Foreign Ministry Spokesman Hamid Reza Asefi, referring to this statement, said: "This quotation is inaccurate, since the production of nuclear weapons does not exist in Iran's [defense] doctrine, and senior officials in the country will never go in this direction." 
In contrast to Asefi, Expediency Council member Murtaza Nabavi agreed with Bahonar's statement, and said: "The public has the right to make decisions for the country. Bahonar's statements simply reflect public opinion in [our] society." 
*Mohammad Saidi, Head of the International Department of the Atomic Energy Organization of Iran: "There is No Connection Whatsoever Between Heavy Water Production and Plutonium Production"
Mohammad Saidi, head of the International Department of Iran's Atomic Energy Organization, was interviewed by the Iranian conservative daily Kayhan, which has close ties with Iran's Supreme Leader Ali Khamenei, on the occasion of the launching of the Arak heavy water plant. In the interview, Saidi said:
"There is no connection whatsoever between heavy water production and plutonium production. These plants only isolates the isotopes needed to manufacture heavy water. It is the [Western] media that intentionally confuses [our] heavy water production plant with a heavy water reactor, taking advantage of their readers' ignorance in technical matters. In principle, that is why the Additional Protocol regulations have been applied to our heavy water plant, instead of the understandings we reached in the Safeguards Agreement. This shows that these facilities contain no fissile materials, which the IAEA would want to monitor closely in accordance with the Safeguards Agreement...
"The [heavy water production] project [in Arak] is progressing according to the schedule submitted to the IAEA, and is being monitored in accordance with the Safeguards Agreement. The project may yield results even sooner than [specified in] the schedule." 
*Editorial in Resalat: "The Only Way to Deal With Iran is to Accept Its Being Nuclear and to Learn to Live With It"
An editorial in the conservative daily Resalat read: "Mahmoud Ahmadinejad's inauguration of Iran's atomic energy heavy water plants in Arak, and Iran's joining the eight countries in the world that have heavy water production plants, show once again that the levers in the hands of the White House and the European Union are completely ineffective. The announcement that [Iran] has achieved a nuclear fuel production cycle, in the Iranian scientists' second nuclear leap forward, confounded the opponents of Tehran's nuclear [program]...
"Dynamic Iran, with its wealth of nuclear know-how, is an entity that attaches no importance to pretty words and useless incentives, and the only way to deal with it is to accept its being nuclear and to learn to live with it.
"Iran proved to the West in the last year its opposition to stagnation by presenting concrete and practical developments. Many of the West's efforts and much of its strategic spending were dedicated to keeping Tehran from arriving at the present point. Not only was this spending for naught, but Islamic Iran has become even stronger in the Middle East and in the world.
"The Iranian scientists' recent advance, and the production of 16 tons of heavy water per year in the Arak plants will, no doubt, entail severe consequences... for the opponents of the Iranian nuclear [program]. The most important consequences will be a widening of the scope of disagreement among the Western governments and [the casting of] doubt on the threatening approach [they have adopted] vis-à-vis Tehran. In consequence, there will be more willingness for direct negotiation with Iran on the nuclear issue.
"Iran's production of heavy water has made things clear to Bush and his cronies once and for all. The gap that opened up in the Security Council is growing wider and wider every second, and it will not be long before the White House's virtual consensus against Iran will completely crumble. Despite the fact that the atmosphere in the West is not calm, Iran is continuing, in a composed manner, and without paying any attention to pressures and threats, its path of advance and evolution, in order to prove that the making of useless concessions to the White House and the West is tantamount to the death of [Iran's] dynamism and entry into stagnation." 
 See MEMRI TV Clip No. 1246, "Iranian Generals Reveal New Weapons Systems and Methods and Discuss the Possibility of Confrontation with American Forces in the Persian Gulf," August 21, 2006, http://memritv.org/clip/en/1246.htm .
 Iran Daily (Iran), August 27, 2006.
 Shargh (Iran), August 28, 2006.
 Fars News Service (Iran), August 27, 2006; http://www.farsnews.com/newstext.php?nn=8506050286.
 Shargh (Iran), August 28, 2006.
 Shargh News Service (Iran); http://www.sharghonline.ir/news/archives/004277.php.
 Kayhan (Iran), August 28, 2006.
 Resalat (Iran) August 27, 2006.