UPDATE 1-EU allows Iran oil insurance for now, to decide in May

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* Targets 17 Iranians with sanctions

* EU's Ashton expects details on talks with Iran soon (Adds comments from Ashton)

By Justyna Pawlak and Sebastian Moffett

BRUSSELS, March 23 (Reuters) - The European Union agreed on Friday to exempt until July 1 some insurance on Iranian oil shipments headed for destinations other than Europe from its embargo on trade in crude, and to decide before the middle of May whether to allow cover after that date.

The exemption and its planned review was agreed by EU foreign ministers at a meeting in Brussels as part of a package of rules on the implementation of the EU's oil ban against Iran.

It will allow customers who are not prevented from buying Iranian crude by Europe's embargo, which started coming into effect in phases in January, to obtain third-party and environmental liability cover from European insurers.

This exemption will make it easier for buyers in Asia who lobbied for exemptions to insure shipments, because the majority of the world's tanker fleet is covered by European companies.

"I think where we've got to on the insurance is the right place and we have a process that will now take place," EU foreign policy chief Catherine Ashton said after the meeting.

EU capitals agreed in January on an oil embargo as part of efforts to pressure Iran to curb nuclear activity that many Western countries fear is aimed at developing atomic bombs. Tehran denies its programme has military purposes, saying its uranium enrichment aims to boost power supply.

As well as stopping EU states from importing Iranian crude, the embargo banned European companies from transporting, purchasing or insuring crude and fuel originating in Iran and intended for anywhere in the world.

That decision had raised concerns by buyers such as Japan and Korea that their shipments would go uninsured, driving them to lobby Europe for exemptions.

But discussions on the issue proved difficult, with European capitals divided over how to implement the oil embargo. Any extension of the exemption could be tough to achieve, EU diplomats say. "There are differences of opinion and any change would have to be unanimous," one EU diplomat said.

PUSH TO EXEMPT

Ashton also said she would announce soon a date for a resumption of negotiations between Iran and six world powers, whom she represents in dealings with Tehran, over its nuclear programme.

Facing unprecedented Western sanctions, Iran offered to resume talks last month, and diplomats from the six powers -- the United States, Russia, China, France, Britain and Germany -- have been discussing details with Ashton in recent weeks.

"My focus is on trying to get the talks moving again and I hope in a very short while to be able to announce the date and venue of such talks," she said.

Some EU states, such as Britain where most of the oil trade insurers are based, had pushed to exempt some cover for Iranian crude headed outside Europe, arguing this would help stabilise world crude prices, diplomats said.

But other governments, which had to sacrifice lucrative contracts with Iran to comply with sanctions, had lobbied against exemptions, EU diplomats said.

Reflecting anger among some EU member states over the issue, one diplomat called Friday's agreement shameful.

"It's shameful that certain EU countries will suffer economic losses due to the oil embargo on Iran, while other countries will keep making money on it," the diplomat said.

Under the embargo, EU buyers with existing contracts to import crude from Iran can continue with them until July 1. Insurance on such purchases is allowed, new contracts are not.

Separately, EU governments agreed on Friday to add 17 people to a list of Iranians targeted by EU asset freezes and travel bans due to their alleged involvement in human rights abuses.

The sale of telecommunications equipment to Iran that could be used for repression, for example to monitor or intercept internet and telephone communications, was also banned.

"That decision comes in the wake of several expressions of the EU's deep concern about the deteriorating human rights situation in Iran," the EU said in a statement.

The United Nations said in a report this month that Iran was executing more and more people, with some 670 people put to death last year, most of them for drug crimes that do not merit punishment under international law and more than 20 for offences against Islam. (Editing by Mark Heinrich)

United Nations Energy