German firms have hit out against their government's support for UN sanctions imposed on Iran's financial institutions that, amongst other things, restrict letter of credit (L/C) transactions between the Islamic republic and countries in support of the sanctions.

German business leaders argue that increasing financial pressure on Tehran is the wrong way to pursue Iran over its nuclear ambitions.

L/Cs blocked

"It is definitely wrong to further aggravate the situation," the executive director of Germany's industry association of plant and machinery makers, Hannes Hesse told the business daily Handelsblatt.

"What political sense does it make to generally block current L/Cs and (financial) transfers of the state-owned Bank Sepah and thus largely delay payments to German firms," asks Hesse.

Asian competitors

Germany's business community is concerned that it may lose out in burgeoning Iranian markets to competitors from countries not in support of the UN sanctions.

"There is a big danger that Tehran will in the long run seek its suppliers in East Asia," says the head of the foreign trade department of the German Wholesale and Foreign Trade Association, Jens Nagel.

Fresh sanctions?

Senior officials from countries that back the UN sanctions - the US, Britain, France, Germany, Russia and China - warned Iran at the beginning of May of fresh UN sanctions if it refused to halt uranium enrichment work which some countries suspect could be used to build nuclear weapons.The UN has imposed two sets of sanctions on Iran since December for its refusal to curb its nuclear ambitions.

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