Germany on Wednesday approved an application by French firm Framatome to produce nuclear fuel rods under a licensing agreement with state-backed Russian firms despite political concerns, arguing it lacked the legal basis for a rejection.

A Framatome subsidiary had applied to produce at its plant in northern Germany fuel elements to supply nuclear plants in the eastern European market using Russian licenses and technology in a joint venture with Russian firms TVEL/Rosatom.

Despite political concerns due to Russia's war in Ukraine, the environment ministry in the state of Lower Saxony with guidance from the federal environment ministry granted the necessary approval subject to certain conditions.

A spokesperson for the federal ministry said that while the government in Berlin has a critical view of the cooperation with a Russian state-owned company, the decision was made in accordance with the relevant nuclear laws of Germany.

"The appropriate instrument to address this, however, is not nuclear law, but rather EU-wide sanctions, including those in the nuclear sector," the ministry said in a statement.

"So far, however, a majority of member states has not supported such sanctions. Therefore, we continue to advocate strongly for EU sanctions against Russia in the nuclear sector," it added.

Framatome welcomed the decision.

"This decision strengthens European energy security, supports industrial sovereignty and reaffirms our commitment to providing safe and diversified fuel supply solutions to nuclear operators across Europe," Framatome said in a statement.

The French nuclear reactor parts company has argued the collaboration is an interim step to help customers operating Russian-designed reactors to diversify away from direct Russian purchases until it develops its own production technology.

Its application had drawn tight scrutiny from the German authorities including over security and sabotage concerns.

The license now granted features a number of stipulations to mitigate these risks, including an entry ban to the facility for TVEL or Rosatom employees as well as external security audits of equipment and fuel rods arriving from Russia.

There is so far no EU agreement on an extension of sanctions on Russia to the nuclear power sector, but Germany was working towards that, a ministry spokesperson told Reuters.