Iranian president Mahmoud Ahmadinejad accused Iran's Saudi-led Persian Gulf allies of being American pawns on Wednesday, the Fars news agency reported.

"The colonialists are friends of no one, they only friends to money, wealth and power. They have deceived their friends and are using a number of Arab states for the sake of others in a bid to achieve their own interests," Ahmadinejad said on Wednesday.

Ahmadinejad singled out Arab states who have sided with the West, saying, "They are wrong if they think that they can buy the mercy of the US and its allies through their oil and money and purchasing (western) arms. They are all pawns and playing in a US plot."

Friendship with the Iranian nation is their only solution, and they should know that the Iranian nation will not retreat against their expansionism," Ahmadinejad said.

Ahmadinejad’s remarks come as Iran conducts wide-scale Naval exercises in the Straits of Hormuz and father afield. The exercises, which Iran says send "a message of peace," have been a sign of rising Iranian aggression amid tensions with the West and its Saudi rivals for hegemony in the Persian Gulf.

Last week the six-member Saudi-led Gulf Cooperation Council (GCC) resolved to pursue the formation of a diplomatic and military union as a means of forming strategic ballast against Iran, who they accuse of seeking to destabilize their regimes by inciting their Shiite populations against them.

The GCC announced it hoped to expand its membership by inducting Egypt, Jordan, and Morocco into its ranks, as well.

The GCC has also championed Western efforts to weaken Iran's regional axis of influence and has joined Washington in targeting the embattled regime of Syrian president Bashar al-Assad and Hizbullah.

Iran and Saudi Arabia have been at loggerheads over dominance in the Persian Gulf. A Wikileaks document released earlier this year revealed Iraqi officials have been complaining for years that Riyadh and Tehran are respectively funding competing Shiite and Sunni insurgencies in the war-ravaged country.

Riyadh, concerned over the prospect of an Iranian atomic bomb, has said it will seek nuclear weapons of its own should Tehran obtain them.