Iran's supreme leader said Friday that America's military occupation of Iraq was failing and criticized President Bush's call for greater democracy in the Middle East.

Ayatollah Ali Khamenei (search), whose hard-line Islamic establishment has been accused by the United States of not doing enough to prevent anti-American forces from entering neighboring Iraq, said U.S. troops "are being slapped in the face every day by Iraqis."

"They (the United States) invaded Iraq with a promise to free its people but they have created a deplorable situation there," Khamenei told tens of thousands of worshippers at Tehran's Grand Mosque during a Friday prayer sermon.

U.S. forces are coming under increased resistance from forces inside Iraq, with more than 50 coalition soldiers killed this month.

Khamenei said the Americans "overthrew an Iraqi dictator (Saddam Hussein) and installed a foreign dictator (U.S. provisional authority chief L. Paul Bremer (search)) in his place."

Khamenei's comments come as Iran tries to disprove U.S. claims that it is pursuing a nuclear weapons program. The dispute has further aggravated longstanding tensions in U.S.-Iranian relations.

Khamenei also assailed Bush's recent appeal to Middle Eastern states, particularly Iran, to do more to promote democratic reform.

"People who so openly disregard the rights of nations and views are ... mistaken to regard themselves as the custodians of democracy," the Iranian leader said.

Khamenei also used his mosque sermon to defend Iranian hard-line authorities who have cracked down on reformist publications, saying U.S. backers in Iran are seeking to use the country's press to bring down the ruling Islamic establishment.

The crackdown has put nearly 100 publications out of operation over the last 3½ years for criticizing the rule of Iran's unelected hard-liners.

"Anybody provoking a psychological war against the (Iranian) establishment works for the U.S., no matter (if) he receives money for this or works (for) free," the leader said.

Unelected hard-liners control the levers of power in Iran and have blocked most attempts by the elected government to reform the country's Islamic regime. Khamenei has final say in all matters.