The Kuwait Investment Authority (KIA) has warned Germany it may cut back its commitment to ploughing funds into the German economy if the Berlin government regulates sovereign wealth funds.

"Nobody wants to build obstacles for investments...That would be crazy," German Finance Minister Peer Steinbrueck said during a visit to the OPEC producer on Tuesday, the first leg on a Gulf trip aimed partly at improving ties with sovereign funds.

"We should have a strong interest to attract sovereign wealth funds," he told Kuwaiti business leaders, responding to questions on whether Berlin wanted to deter Kuwait's investments.

Many German politicians are nervous about the influence sovereign wealth funds can wield and their capacity to buy leading national companies or key national infrastructure.

The German government plans to extend existing legislation that gives Berlin a veto on takeovers of defence firms to include other industries, though Steinbrueck has said Germany does not want to scare off sovereign wealth funds. The planned new legislation will not name "strategic" sectors that are off-limits to foreign investors.

Steinbruecksaid Germany was only implementing what countries such as the United States, Britain or France had already set in place.

"We just want to prevent to the possibility in theory that we open the door to bad guys," he said, adding that Berlin would study any difficult decisions on a case to case basis.

In 2006, Dubai-based Dubai Ports World relinquished plans to buy six major U.S. ports after a political storm.

"That wouldn't happen in Germany," Steinbrueck said.

Steinbrueck earlier met government officials and KIA Managing Director Bader al-Saad who told Spiegel magazine any regulations might limit Kuwait's engagement in Germany.

Kuwait's Finance Minister Mustapha al-Shamali told state news agency KUNA after meeting Steinbrueck KIA funds were facing no problems with investments in Germany.

The KIA had $213 billion in assets under management by March 31, 2007, according to the latest available figures.

Government-owned investment vehicles control over $2 trillion -- roughly the size of France's economy -- and are forecast to grow rapidly to $12 trillion by 2015.

In recent months, funds from Asia and the Middle East have injected money into major banks like Citigroup Inc C.N, Merrill Lynch & Co Inc MER.N and UBS AG UBSN.VX after they were hit by exposure to the U.S. subprime crisis.