"We are most decisively in favour of the fact that Iran completely gives up military use of nuclear power, forever if at all possible," Schroeder told global political and business leaders at the World Economic Forum.

"But we are just as convinced that has to be achieved through diplomatic and political means," he added.

Schroeder's comments came amid reports that the European Union had hardened its stance over Iran's controversial nuclear plans, by urging Tehran to completely dismantle its nuclear fuel programme in order to guarantee that it does not seek atomic weapons.

Iran has denied that crucial negotiations with Britain, France and Germany for a long-term solution to the issue were deadlocked.

But Schroeder reiterated his rejection of the use of force, a week after US President George W. Bush said he could not rule out military action if Iran could not be persuaded to abandon its nuclear energy program.

Washington suspects Iran is trying to build nuclear weapons.

"This is a hotbed region, the last thing we need is a military conflict in that region," Schroeder said.

"I'm very explicit and outspoken about this because I want everybody to know where Germany stands," he added.

According to a report on a closed-door meeting in Geneva this month, representatives of Britain, France and Germany told Iran that "nothing short of full cessation and dismantling of Iran's fuel cycle efforts would give the EU3 the objective guarantees they need that Iran's nuclear program is peaceful."

Senior Iranian government officials were also attending the forum's annual meeting in Davos this week.

Iran suspended nuclear enrichment, the key process that makes fuel for nuclear reactors but also the explosive core of atomic bombs, under a deal clinched in November by the three EU states.

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