"As long as there is no common sanctions policy from the United Nations, there will be no effective control over imports to Iran," Matthias Mitscherlich of the Federation of German Industries (BDI) told Deutschlandradio Kultur.

German Chancellor Angela Merkel has said she wanted to bring fresh sanctions against Iran over its refusal to halt uranium enrichment, preferably in conjunction with Russia and China.

But she has also indicated that Germany would consider further reducing its commercial relations with Iran if no agreement can be struck within the United Nations Security Council.

Mitscherlich, who sits on the board of German truckmaker MAN, said such a move would lead to Germany losing its position as Iran's biggest trading partner in Europe and commercial relationships built up over a matter of years would disintegrate.

"It would be a huge shame if this economic basis is destroyed as a result of short-term political action," he said.

The beneficiary would be China, whose products were already "flooding" into Iran, Mitscherlich said.

In the first six months of 2007, exports of German machine tools and industrial equipment to Iran had dropped by 40 percent, he said.

The United States and some Western nations believe Iran is trying to develop a nuclear weapon, an allegation the Islamic republic denies.