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Germany Said To Crack Down On Iran Business

BERLIN (Reuters) -- Chancellor Angela Merkel has ordered a crackdown on the provision of guarantees to German firms seeking to export goods to Iran, the "Handelsblatt" newspaper reported, citing government and industry sources.

The newspaper said the move was made in reaction to criticism from Germany's partners, including the United States and Israel, about the continued strength of German exports to Iran despite a tightening of Western sanctions over its nuclear program.

Western powers believe Iran is seeking to develop nuclear weapons under the cover of a civilian atomic programme. Tehran says it wants to master nuclear technology for peaceful power generation purposes.

New U.S. President Barack Obama has vowed to break with the previous U.S. administration and talk with Iran about its nuclear program.

Reports in recent weeks have said European countries, including Britain, France and Germany, could seek to pass new sanctions against Iran, which has rejected repeated calls from the UN Security Council for it to suspend uranium enrichment.

Germany has traditionally been one of the top exporters to Iran, and the paper reported that exports had risen 10.5 percent on an annual basis to 3.58 billion euros through November 2008.

To counter this, the paper said, Merkel had instructed the Economy Ministry to offer "Hermes cover," or export credit guarantees, to German firms seeking to do business with Iran only in exceptional cases.

German firms receive such guarantees when selling goods to markets considered risky.

Available data shows that German export guarantees for trade with Iran have fallen significantly since last year. The Economy Ministry said a year ago that new guarantees for Iran fell to 503 million euros in 2007 from 1.16 billion euros in 2006.

Figures for 2008 will be published in the coming weeks, but half-year numbers for last year show a sharp decline in new guarantees to 73 million euros, compared to 387 million in the first half of 2007.