A leading security expert, Albert Stahel, says the sale of armoured vehicles to Iraq could make Switzerland a possible target of terrorist attacks.
He also warned that the deal, approved by the cabinet last month, would undermine Swiss neutrality.
Stahel said the sale of 180 armoured vehicles to the United Arab Emirates, which in turn will present them to Iraq, was a mistake.
"We have to remain neutral in the Iraqi conflict," Stahel said in an interview with public radio, DRS, on Saturday.
He added that last month’s cabinet decision to allow the export of the armoured personnel carriers meant Switzerland was taking sides.
Stahel also said Switzerland had to consider carefully its relations with the Islamic world. Otherwise it risked becoming a target of terrorist attacks.
Senior Swiss parliamentarians expressed similar concerns in Saturday’s edition of the tabloid Blick.
Stahel’s comments came two days after a series of bomb blasts in central London, believed to have been carried out by Islamic extremists.
At least 50 people were killed and some 700 others injured in Thursday’s attacks on London’s transport system.
Stahel believes the risk of an attack by Islamic extremists on Switzerland remains very small. But he told swissinfo that some members of terrorist groups were able to use the country’s financial institutions to deposit money.
Switzerland still enjoyed a good reputation in the Arab world because it benefited from the Swiss-run International Committee of the Red Cross.
According to Stahel, the government could use the armoured vehicles for the protection of foreign embassies in Switzerland instead of selling them to other countries.
The government decision to sell M113 tanks from a Swiss army surplus prompted immediate criticism by two of the main political parties at the end of June.
The rightwing Swiss People’s Party and the centre-left Social Democrats said the move was contrary to neutrality and went against Swiss development policy.
But the two leading centre-right parties agreed with the government that the sale could help stabilise the situation in Iraq. The cabinet said the United Nations had called on its members to preserve law and order in Iraq.
swissinfo with agencies
From now until 2010, the Swiss army has to dispose of a surplus worth SFr10 billion ($7.7 billion), including 1,200 M109 and M113 armoured vehicles.
The United Arab Emirates wants to buy 180 M113 personnel carriers as a gift to Iraq.
Two of the four main political parties criticised the government decision as contrary to Switzerland’s traditional neutrality.