Austrian police have arrested a local businessman suspected of involvement in a company project exporting equipment to Iran that could be used in nuclear weapons.

Prosecutor Manfred Kammerer said a three-man import-export firm, Daniel Frosch Export, was suspected of having supplied capacitors and accelerators to Iran which can be used in civilian industry but also for atomic weapons.

Kammerer said Erich Frosch, father of the company director, had been arrested and some electronic parts seized in August in the southern Austrian city of Graz.

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Kammerer said police also wanted to detain company director Daniel Frosch but he had moved to Dubai in the United Arab Emirates (UAE) before August following repeated warnings from Austria's economics and labor ministry, which oversees exports controls, to stop the deliveries to Iran. Daniel Frosch's lawyer said he had done nothing illegal.

"The accusations against my client are baseless. Business with Iran was done, but the devices and parts delivered were for civilian use ... in accordance with Austrian export law," lawyer Gerald Ruhri said.

Kammerer said capacitors and accelerators were on a list maintained by industrialised nations of parts and technology of potential use in nuclear arms and restricted for export to Iran.

"They seem to be dual use items. I don't know the specifications but the capacitors are normally for more military applications," a senior IAEA diplomat said.

Austria has no extradition agreement with the UAE and Kammerer was not aware of requests to Dubai to hand over Frosch. Frosch could not be contacted under the phone number listed on his firm's Web site, which still names Graz as its headquarters.

The third man who worked at the firm was not detained because he had cooperated with prosecutors, Kammerer said. A prosecutors' investigation would be concluded in the coming weeks, he added.