EU exports to Iran rising despite sanctions

BRUSSELS (Reuters) - European Union exports to Iran are on the rise again after a three-year decline, despite United Nations sanctions over Tehran's nuclear program, figures from the EU's statistics office Eurostat show.

Exports from the 27-nation bloc to the Islamic Republic rose to 4.47 billion euros ($6.93 billion) in the first five months of this year, up 17.8 percent compared with the same period in 2007, even as tension with Iran on the nuclear issue mounted.

The main increases were in exports of vehicles, machinery and other manufactured goods with Germany, Italy and France registering the largest increases. But sales from Britain, Belgium and the Netherlands fell.

The pick-up comes after three years in which annual EU exports slipped from 12.99 billion euros in 2005 to 10.10 billion euros last year.

An EU official said the figures appeared to highlight Iran's ability to use oil revenues swollen by soaring world oil prices to buy goods with cash, despite a clampdown on export credit guarantees by European governments.

The United States has been pressing Europe to scale back on business ties with Iran.

German Chancellor Angela Merkel urged German firms on Wednesday to show sensitivity in their dealings with Iran, following Israel's criticism of a German firm's gas plant deal.

Berlin has said the company's plans to export three liquefied natural gas plants to Iran were approved earlier this year because they did not fall under any category of goods banned from export.

The West accuses Iran of seeking to develop a nuclear weapons capability under the cover of a civilian power program. Iran, the world's fourth-largest oil producer, says it only plans to generate electricity.

An EU regulation implementing the most recent of three U.N. sanctions resolutions goes into force this week. It will allow European navies to inspect all cargoes to and from Iran and instruct EU member states to exercise restraint in credit risk insurance.

(Reporting by Paul Taylor; Editing by William Schomberg)