"His comments throw a shadow over the whole negotiation process," Erwin Haeckel, Iran expert at the German Council on Foreign Relations, a Berlin-based foreign policy think tank on Thursday told United Press International in a telephone interview. "There is a certain feeling of helplessness: What to do with Ahmadinejad, what to offer him?"

The Iranian President, in office since August, earlier this week in a live broadcast on Iranian television said the Holocaust was a myth the Jews had invented.

"They have fabricated a legend under the name 'Massacre of the Jews,' and they hold it higher than God himself, religion itself and the prophets themselves," he said. "This is our proposal: give a part of your own land in Europe, the United States, Canada or Alaska to (the Jews) so that the Jews can establish their country."

That statement would have got him arrested in Germany, as denying the Holocaust is a federal crime there. Similar laws exist in Austria, so an (albeit unlikely) trip to the International Atomic Energy Association in Vienna is now also out of the question. Senior politicians around the world immediately denounced the comments.

Foreign Minister Frank-Walter Steinmeier called Ahmadinejad's speech "shocking and unacceptable," and added his government couldn't hide the fact that "this weighs on bilateral relations and on the chances for a successful negotiation process."

White House spokesman Scott McClellan agreed. "His comments and statements only underscore why it is so important that the international community continue to work together to keep Iran from developing nuclear weapons," he said.

Iran can, under its international treaty obligations, enrich uranium, but Washington and others fear the Islamic republic is using the process to secretly and illegally make nuclear weapons. Iran denies the charge. Germany, along with European Union partners United Kingdom and France, is due to resume talks with Iran over its nuclear program next Wednesday.

The talks collapsed in August when Iran reopened a plant in Isfahan that had been locked down under a November 2004 deal between the so-called EU-3 and Tehran, known as the Paris Agreement.

In light of Ahmadinejad's aggressive rhetoric, the EU-3 are fated to strike a harsher note, observers say.

The President of the Jewish Central Council in Germany, Paul Spiegel, said the EU-3 should wave goodbye their "appeasement politics," break off diplomatic contacts with Tehran and think about economic sanctions.

The German Green Party said Iran should be excluded from next year's FIFA Soccer World Cup in Germany. The international soccer federation FIFA on Thursday quickly announced that was not an option.

"The only way you could hurt Iran is by sanctioning on oil exports," Haeckel said. "But that is virtually impossible because our global economy depends on a stable oil price which you could wave goodbye in case of an Iranian oil embargo. Ahmadinejad knows that very well."

Stopping talks altogether could destroy the hope for a peaceful solution of the conflict, said Johannes Reissner, Iran expert at the German Institute for International and Security Affairs, a Berlin-based think tank.

"We need to stay on the ball here," Reissner on Thursday told UPI. "Breaking off talks because of Ahmadinejad's recent remarks would be wrong, it would lead to nothing."

Despite the fact that roughly 62 percent of the ballot chose Ahmadinejad in the June runoff over former President Akbar Hashemi Rafsanjani, there are currents in the political and cleric circles that would like to see the president's power diminished, Reissner said.

"A lot of domestic rivalries aren't quite settled yet," he told UPI. "The mullahs are no homogenous group, so we might have to wait and see what happens next year."

Haeckel said the EU-3 should try to bring Russia and China on board.

Russia and Iran have cultivated a busy trade relationship, which recently drew concern from Washington -- Moscow agreed last month to a $1 billion arms sale to the Islamic Republic. Russia will deliver an air defense missile system between 2006 and 2008 and upgrade Iranian fighter jets.

Iranian-Chinese trade volume will likely have reached the $10 billion mark at the end of this year, according to Chinese officials.

Both countries have veto power in the United Nations Security Council, which they are likely to use if the United States and the EU call for U.N.-mandated sanctions.

"Without the help of China and Russia, I don't see a way out of this problem," Haeckel said.

It might reassure European negotiators that Chinese officials Thursday joined in the swift global condemnation of Ahmadinejad's Holocaust denial.

"We are not in favor of any remarks detrimental to regional stability and peace," foreign ministry spokesman Qin Gang said. "Israel is a sovereign state."

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