TEHRAN (Reuters) - Iranian Foreign Minister Manouchehr Mottaki said on Saturday Iran's decision to ban 38 U.N. atomic inspectors was within the country's legal right and should not create problems with the U.N. atomic watchdog.

The watchdog, the International Atomic Energy Agency (IAEA), has asked Iran to reconsider its decision to bar the inspectors, who routinely visit the country to verify Tehran is not diverting materials into bomb production.

"The recent decision will not legally create a problem between us and the IAEA," Mottaki told a news conference, when asked about the IAEA review for Iran to review the ban.

"Iran's relationship with the IAEA is set on the basis of the regulations ... and we take decisions on our cooperation based upon our rights seen in those regulations," Mottaki said.

The Islamic Republic of Iran said on Tuesday it was barring entry to inspectors, who were nationals of Western states which sponsored the U.N. sanctions or backed them. The IAEA has a pool of 200 inspectors for such assignments.

Tehran has a right to reject any inspector but diplomats have said the IAEA did not want to see a precedent set for hampering inspections and thereby escalating Iran's confrontation with Western powers.

The West accuses Tehran of seeking to make atomic bombs, a charge Iran denies, saying it wants to generate electricity. Iran insists it is still cooperating with the IAEA.

U.N. sanctions were imposed on Iran in December, banning the transfer of sensitive materials and know-how to Iran's nuclear and missile programmes over its refusal to stop enriching uranium, a process that can yield fuel for power stations or material for bombs.

Three IAEA inspectors arrived in Tehran Friday night to inspect Iran's nuclear facilities in Natanz and Isfahan, state television reported on Saturday.