"This is an unfounded theory. It's not very clear how crane equipment can be used in Shahab 3 and 4 production," foreign ministry spokesman Hamid Reza Asefi told reporters.

The weekly Der Spiegel magazine said in a report due to appear in its Monday edition that a company blacklisted by the German authorities bought a crane to help in the manufacture of Iran's Shahab missile programme.

Mizan Machine paid the Liebherr company based in southern Germany 600,000 euros (785,000 dollars) last August for the crane, the magazine said, adding that customs authorities were not told about the deal until the freighter transporting the equipment had left Germany for the Middle East.

But Asefi said Germany was known as one of Iran's economic partners, and criticised the Europeans for "inflicting restrictive measures while claiming to believe in open trade".

According to Der Spiegel, German customs tried to get the ship stopped. At the weekend it was reported to be at Port Said in Egypt at the entrance to the Suez Canal.

Iran has recently upgraded the Shahab-3 ballistic missile, believed to be based on a North Korean design, to have a range of at least 2,000 kilometres (about 1,200 miles).

Iran has, however, denied working on a Shahab-4 -- even though Asefi referred to one.

Tehran's steady progress on its ballistic missile programme is a major cause for concern among the international community, particularly Israel, which is already alarmed over Iran's nuclear activities.