UPDATE 2-Germany cuts Iran guarantees but exports rise

(Adds French data, paragraph 5)

By Kerstin Gehmlich

BERLIN Feb 24 (Reuters) - Berlin has significantly cut the value of new credit guarantees it offers firms that do business with Iran, but German exports to the Islamic Republic still rose last year, according to new figures seen by Reuters.

Germany has been one of the biggest exporters to Iran in recent years, although the government, under pressure from major allies, has urged German companies to limit trade with Tehran.

Figures provided to Reuters by an economy ministry official show the value of new government export guarantees fell to 133 million euros ($169.5 million) in 2008 from 503.4 million euros in 2007. German firms receive the guarantees for exporting goods to markets considered risky.

Separate data from the Federal Statistics Office show exports to Iran rose to 3.92 billion euros last year from 3.6 billion euros in 2007, suggesting firms are prepared to take the risk of doing business with Iran even without the safety net of state export guarantees.

French exports to Iran also increased last year, data from the euro zone's second largest economy show, with exports at 1.8 billion euros versus 1.5 billion euros the previous year.

Leading western nations, including Germany and France, are involved in a long-running dispute with Iran over its nuclear programme.

They suspect Iran is trying to develop the capacity to make nuclear weapons. Iran says it needs the technology for electricity generation.

The U.N. Security Council has imposed three rounds of sanctions on Iran for failing to suspend uranium enrichment, a process that can produce fuel for power plants or, at a high level of enrichment, nuclear bombs.

German Chancellor Angela Merkel said earlier this month she hoped for a diplomatic solution to the dispute but that Germany was ready for tougher sanctions if there was no progress.

Germany's conflicting interests in its ties to Tehran were highlighted last week when former Chancellor Gerhard Schroeder met President Mahmoud Ahmadinejad during an informal visit to Iran.

Some commentators criticised Schroeder for putting business interests before political considerations, saying he had been sent by investors fed up with export restrictions.

Other analysts praised the former chancellor for his efforts to talk with Iran's leaders, saying this could add credibility to the West's diplomatic efforts in the nuclear dispute.

U.S. President Barack Obama has vowed to break with the previous U.S. administration's policy and talk with Iran about its nuclear programme. (Reporting by Kerstin Gehmlich; Editing by Giles Elgood)