Reuters correspondent Ori Lewis in Jurasalem reports, that Shaul Mofaz also said Israel was preparing to protect itself if international diplomatic efforts failed to convince Iran to give up its nuclear program.

Speaking at the Herzliya conference, an annual gathering of politicians and academics, Iranian-born Mofaz said he knew a large portion of the Iranian people did not support President Mahmoud Ahmedinejad's ideology.

Mofaz addressed the Iranian people saying: "Ahmedinejad, his hallucinatory statements, his criminal actions and his extreme views will bring disaster upon you. Do what you understand needs to be done in order to prevent this."

Mofaz, who was speaking in Hebrew, said Ahmedinejad should look at historical examples of others who tried to destroy the Jewish people.

"You, who are leading your country in an ideology of hatred, terror and anti-Semitism. You had better take a glance at history and see what became of tyrants like you who tried to annihilate the Jewish people. They only brought destruction upon their own people," he said.

Ahmedinejad has said that Israel should be "wiped off the map" and has questioned whether the Holocaust took place.

Mofaz said that 2006 was a "year of transition" during which Iran would not yet have a nuclear bomb, but that Israel would have to do all it could to make sure the United States and European nations maintained diplomatic pressure on the Iranians.

The United States and European Union want Iran's nuclear program to be referred to the U.N. Security Council, which has the power to impose sanctions, and accuse Tehran of seeking nuclear bombs.

Iran says its nuclear program is purely for generating electricity.

"Israel's policy is ... to bring this hot potato to the Security Council to impose sanctions and invasive inspection," Mofaz said.

He said Israel would nevertheless continue its preparations to protect itself if diplomatic means against Iran failed.

"Israel must be capable of protecting itself and ... we are preparing for this," he said.

Mofaz also renewed an accusation that Iran was directly involved in funding, arming, training and encouraging Palestinian militant groups to attack Israel.

"Money is the fuel which drives terror. The annual financial support to (Lebanon-based) Hizbollah stands at some $100 million," Mofaz said.

He said in the last year Islamic Jihad, a militant group sworn to Israel's destruction based in the occupied West Bank and Gaza Strip, had received over $10 million of Iranian money compared to some $5 million the year before.

Iran says it gives only moral support to Palestinian groups.