Iran sanctions not effective-business official

TEHRAN (Reuters) - Western-backed sanctions on Iran to crimp its disputed nuclear activities will not have the desired impact as the country increasingly turns to Asian and regional countries, an Iranian business official said.

Mohammad Nahavandian, head of Iran's Chamber of Commerce, said sanctions had raised the costs for Iranian trade. But Iranian hardline leaders have brushed off the impact of U.S. and U.N. sanctions on the Islamic Republic.

"It has been proven that the Iranian economy is not sanctionable...the stated goal of sanctions is political, which has never been achieved," Nahavandian told Reuters in an interview.

"Yes, there has been some economic costs involved. Yes, the transaction costs go up ... but the trade will not stop and has not been stopped."

The United States and its European allies have been trying to pressure Iran to suspend its disputed nuclear program, which the West fears is a cover to build bombs. Tehran says its atomic work is for peaceful purposes and will not be halted.

The United States, which has imposed sanctions on most trade with Iran since its 1979 Islamic revolution, is pushing for a fourth round of U.N. penalties on Iran because of its failure to halt sensitive atomic work.

SHIFT TO AISA

Nahavandian said Iran was increasingly dealing with non-western countries, including Asian and regional countries.

China, a veto-wielding member of the U.N. Security Council, is reluctant to approve further sanctions on Iran.

"The trade between Iran and China is now over $28 billion," he said. "With indirect trade, it may be about $31 billion, which is above the trade with the European Union."

Western firms are increasingly wary of investing in Iran, the world's fifth-largest oil exporter, because of the nuclear row and political instability in the country.

"Sanctions increase the economic costs not only on sanctionee but also on sanctioners too," said Nahavandian, adding that sanctions would harm Iranians more than the country's political decision-makers.

Tighter sanctions may focus on Iranian banks, as well as individuals and companies connected to Iran's elite Revolutionary Guards organization.

The organization has replaced foreign firms in some projects, expanding its financial activities to cover areas such as import-export, oil and gas, defense, transport and construction.

Analysts say the political and the economic influence of the Guards appears to have grown since hardline President Mahmoud Ahmadinejad, himself a former Guardsman, came to power in 2005.

The force played a key role in quelling street unrest that erupted after Ahmadinejad's disputed re-election in June.

"Any kind of political disturbance can have an impact on the economy...but these tensions were of short-term nature," Nahavandian said. "None of Iran's political factions wants economic isolation."

Ahmadinejad, accused of squandering windfall oil revenue Iran earned when crude prices soared in 2008 and leaving Iran more vulnerable to any new U.N. sanctions, has sought to encourage private investment to boost the economy.

(Additional reporting by Ramin Mostafavi)