The comments came in a news conference at Mr Bush's Texas ranch, held on November 10 during Mrs Merkel's two-day trip there.

Mrs Merkel said more sanctions might be required to force Iran to give up its nuclear aims - and Germany would study its business ties with the country. She warned that if Iran refused to freeze its nuclear work, then "we need to think about further possible sanctions".

Mrs Merkel added that she would work with the business sector in Germany - one of Tehran's main trading partners - to reduce trade with Iran. Washington has been lobbying its allies to cut business links.

Iran argues it is entitled under the terms of the nuclear Non-Proliferation Treaty to enrich uranium for peaceful purposes, and is ignoring a demand from the UN Security Council to stop.

The US, Russia, China, France, Britain and Germany have agreed to draft a UN resolution calling for new sanctions and officials are meeting in nine days to finalise a text unless the UN's nuclear watchdog reports concessions by Iran.