During one of her early meetings with the U.S. president, German Chancellor Angela Merkel tried to convince George W. Bush that too harsh sanctions against Iran may be counterproductive. Merkel grew up in Communist East Germany, where almost everyone (behind closes doors) was supportive of the sanctions imposed on the Communist East German party leaders. She then told Bush how she remembered that oranges were stopped being sold -- just one example how the Communist party passed the buck on to the ordinary people. Sooner or later, frustration among the ordinary people grew, and the sanctions backfired, Merkel said, adding that a similar mistake shouldn't be repeated in the case of Iran. Bush's sole reply at the time: "Really, you got no oranges?"

Washington doesn't care much about fruit when it comes to Iran's controversial nuclear program and ways to prevent Tehran from acquiring a nuclear bomb.

According to several media reports, hawkish officials close to Vice President Dick Cheney have long drafted plans for a first strike against the Islamic republic. With the Iranian leadership surrounding hard-line President Mahmoud Ahmadinejad showing no signs of giving in, the threat of another potentially catastrophic U.S.-led invasion apart from the Iraq war is worrying officials in Europe.

That's why Washington's allies in Europe are now increasingly ready to back harsher, voluntary sanctions lobbied for by the United States -- also because it's a way to prevent another first strike.

While Russia and China have spoken out against the measure, French President Nicolas Sarkozy has emerged as the strongest supporter of tougher sanctions, and the British traditionally side with Washington. Earlier this month Merkel gave in as well.

The German chancellor just got backed from a cozy visit to Bush's favorite country retreat in Crawford, Texas, where the Iranian nuclear conflict topped the agenda.

After the talks she promised Bush she would "take another look at the economic ties of German companies with Iran, and the signs are such that if the development continues to be so negative, we will constrain our trade activities."

But circles in Berlin also complain that such a move wouldn't make sense if foreign nations were simply stepping in to take over abandoned German contracts.

Germany used to be Iran's biggest trading partner, a position China now holds. German exports to Iran in 2006 dropped by 7 percent and in the first eight months of 2007 by nearly 17 percent, the Frankfurter Allgemeine Zeitung newspaper said. Chinese-Iranian trade, however, grew by 80 percent this year. German government officials behind closed doors also note that France, Italy and Spain have used the German course of retreat to expand their trade ties with Iran.

In 2007 three large German banks announced plans to pull the plug on their activities in Iran. Dresdner Bank pulled out in August citing excessive "bureaucratic expenses." In July Deutsche Bank backtracked from its activities in Iran, following a similar move by rival Commerzbank -- also because of U.S. pressure.

"No plump threats are being issued," one banker told German news magazine Der Spiegel. "But of course there are wishes and subtle hints. And everyone understands that his bank is in deep trouble in the United States if these wishes are ignored."

However, some 1,700 German firms continue to do business with Iran, including steel giant Krupp, chemical company Hoechst and technology firm Siemens. German chemical giant BASF has been active in Iran since 1959 and had a turnover of around $70 million in 2005.

Observers say it will be hard to convince these companies to pull out from Iran simply out of good will for the German government's foreign policy strategy. But it's the many medium-sized companies active in Iran that really have trouble replacing their business with other contracts.

Several German mid-sized firms want to export goods to Iran but have to wait for months until they can do so because the German government checks these export applications.

"The worst thing is that you don't get a clear answer," Wilfried Kroppen of Wirth Europe, a German manufacturer of heavy drilling equipment and machinery, told Der Spiegel. "Such uncertainty can hardly be absorbed by a medium-sized company and is threatening jobs."

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