The German ambassador to the US, Peter Wittig, made the comments while speaking on a range of international issues during a forum in central Ohio.
The US and other nations negotiating with Iran have long suspected that its nuclear program is secretly aimed at weapons capability. Tehran insists the program is entirely devoted to civilian purposes.
The nuclear talks resume next week in Vienna, with a target date of June 30 for a final agreement.
Wittig, in remarks to the Columbus Metropolitan Club, said, "The alternatives to a negotiated deal are not very attractive."
While he said the US Congress would probably be willing to impose new sanctions, other countries would not follow.
"And this universal sanctions regime would crumble," he said. "And that would, in my opinion, unleash this arms race for a nuclear weapon in the region."
The ambassador's remarks came on the same day that the US Senate overwhelmingly passed legislation to let Congress review and possibly reject any final deal with Tehran.
"It could set back Iran's ambitions for a couple months, maybe years, but it would not be lasting and not be very viable," he said.
He said his government urges that diplomacy be given a chance. Any agreement that materializes this summer will be reviewed and judged on its merits, he added.
