Such guarantees -- which insure German firms exporting to risky countries against possible non-payment -- have been "clearly reduced," Thomas Steg, a spokesman for the German government told a regular briefing here.

Berlin has asked German firms exporting to Iran to "voluntarily limit" their trade and "to recognise that it would be wise to support the diplomatic efforts of the international community," Steg added.

However, no decision had yet been taken to put a complete halt to the guarantees, he said.

According to business daily Handelsblatt, Berlin's move comes as a response to increased criticism, notably from the United States and Israel, over Germany's rising trade with Iran.

Germany had traditionally been one of Iran's biggest trading partners. Exports to Iran grew by 10.5 percent in the first 11 months of 2008 to reach 3.6 billion euros (4.6 billion dollars), according to German government statistics.

Nevertheless, Germany has already been squeezing guarantees to Iran as a result of increased political tension between Tehran and the West. The economy ministry says guarantees fell by 57 percent in 2007 to 500 million euros.

Germany's action comes amid signs the US may be changing its policy of refusing to negotiate with Iran, instituted after the Islamic revolution and the storming of the US embassy in Tehran in 1979.

At her Senate confirmation hearing recently, US Secretary of State Hillary Clinton said President Barack Obama's administration would pursue "an attitude toward engagement (with Iran) that might bear fruit."

Germany is one of six countries working together in a bid to persuade Iran to abandon its nuclear ambitions.

Steinmeier's spokesman Jens Ploetner said Berlin's wish was still to find a "peaceful" and "negotiated" solution to the crisis over Iran's nuclear programme, which Tehran insists is for civilian use only.

Ploetner added that officials were working on a meeting of diplomats from the six countries (Germany, France, Britain, China, the US and Russia), expected to be held in Germany next month, but could not confirm an exact date.

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