GERMAN Foreign Minister Guido Westerwelle has said a nuclear-armed Iran was "not an option", as he called on Tehran for "substantial negotiations" over its controversial atomic program.

"We share the Israeli concerns about Iran's nuclear program," Mr Westerwelle said at the beginning of a meeting with Israeli Defence Minister Ehud Barak in Jerusalem.

"A nuclear-armed Iran would not only pose a threat to Israel but to the stability of the entire region. A nuclear-armed Iran is not an option," Mr Westerwelle said.

The so-called P5+1 group comprising the five permanent UN Security Council members plus Germany suspect that Iran may be trying to develop a nuclear weapons breakout capability.

Tehran insists its atomic program is completely peaceful, but Israel has warned that a nuclear Iran would pose an existential threat and said it would take all necessary steps to prevent that from happening, not ruling out a pre-emptive military strike.

"We will keep up sanctions and diplomatic pressure on Iran. We still see room for diplomacy," said Mr Westerwelle in remarks relayed by his office. "We urgently call on Iran to enter into substantial negotiations."

Sanctions by Western states as well as the United Nations Security Council aimed at forcing Iran to curb its nuclear activities have had a crippling effect on its economy, with the Islamist republic's currency sliding to a new record low against the US dollar.

EU foreign ministers meeting in Cyprus on the weekend said they were considering imposing further sanctions on Iran, voicing frustration at negotiations with the Islamic republic that have all but stalled.

Speaking alongside Mr Westerwelle, Mr Barak said that Israel knew that "Germany is a pillar in the international community, standing against Iran's continued movement towards military-nuclear capability, playing a part in both the sanctions and the diplomacy, and whatever might be needed to block them."

Relations between German Chancellor Angela Merkel and Israeli Prime Minister Benjamin Netanyahu have long been tense over Israel's settlement activity and lack of negotiations with the Palestinians.

But Mr Westerwelle's visit comes amid a fresh source of discontent, with Israel's Haaretz newspaper saying Israel was seeking to reach a new understanding with the German government to ensure that arms sales to Arab states would not undermine the Israeli military's qualitative advantage.

Last week, German daily Bild said Israel had protested at the highest level over a deal to sell submarines to Egypt.

Originally published as Nuclear-armed Iran 'not an option'