UPDATE 1-Iran feels heat as Europe ship classifiers halt work

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* Iran's shipping trade seen facing more pain (Adds further comment, detail, background)

By Jonathan Saul

LONDON, June 18 (Reuters) - Germany's Germanischer Lloyd (GL) has stopped verifying safety and environmental standards for Iran's biggest shipping companies, a letter from the company showed, the last big European classification society to pull back as sanctions heat up.

Without verification from such bodies, ships are unable to call at international ports.

The move follows similar decisions in recent weeks by British classification society Lloyd's Register, France's Bureau Veritas and Norway's Det Norske Veritas to halt operations in Iran as Western powers pile pressure on the Islamic Republic over its disputed nuclear programme, putting companies that still trade with Iran in the firing line.

In a letter sent to U.S. pressure group United Against Nuclear Iran (UANI) dated June 15 and seen by Reuters, GL said it had stopped offering services to the Islamic Republic of Iran Shipping Lines (IRISL) and the National Iranian Tanker Company (NITC).

"It is of the utmost importance that we maintain our good reputation," GL said in the letter. "Therefore, we have pursued the decision to cease rendering services to the Iranian companies mentioned."

A GL spokeswoman said on Monday it was not making a statement on the issue.

Classification societies are hired by ship owners to regularly check that vessels, from their hull and propulsion systems to the machinery and appliances, meet international safety standards. Under international conventions, a classification is required for a ship to dock at major ports.

"The Iranian government is going to start to feel the squeeze a lot more and have more difficulty getting cover for their own ships," said Alan Fraser, Middle East analyst with security firm AKE.

World powers began two days of talks with Iran on Monday to try to end a decade-long stand-off over Tehran's atomic work and avert the threat of a new war in the Middle East. Western countries suspect Iran's atomic work is aimed at developing arms, while Tehran says its programme is for peaceful purposes. ID:nL5E8HI0D3]

WALKING TIGHTROPE

UANI, which includes former U.S. ambassadors on its board and is funded by private donations, had said GL's cover for IRISL was in violation of EU sanctions. UANI, which seeks to prevent Iran getting nuclear weapons, had also pressured Bureau Veritas before the French firm stopped its Iran cover.

IRISL has been on a Western blacklist of sanctioned entities for a number of years, while NITC faces the prospect of potential sanctions after the U.S. senate passed a bill last month that aims to target Iran's biggest tanker operator.

GL said it had always been fully compliant with EU and German requirements and had pursued a "very diligent and careful policy" in relation to its activities with Iranian firms.

"Your allegations have already caused severe damage to our reputation as a credible and trustworthy organisation and could cause even further damage," GL said in the letter.

Mark Wallace, UANI's chief executive and a former U.S. ambassador, welcomed GL's decision.

"The shipping industry is now set to help deny the Iranian regime critical access to global trade and seaborne crude oil exports," Wallace said in a statement.

"GL is absolutely correct in stating that working with the Iranian regime is badly damaging to a corporation's good name and reputation," he added.

There are more than 50 agencies that classify vessels, but not all are members of the International Association of Classification Societies, which classifies more than 90 percent of the world's merchant fleet and includes GL, Bureau Veritas, Lloyd's Register and Det Norske Veritas.

It is likely that Iran is already securing cover from Asia-based classification societies, shipping industry sources said.

NITC lost its ship insurance cover from European providers last year due to the sanctions. A senior NITC official said last week it had $1 billion in alternative ship insurance cover, especially from private Iranian firm Kish P&I, to keep its fleet on the water.

The NITC official added that it also had alternative ship classification cover, without giving further details. (Reporting by Jonathan Saul, editing by Jane Baird)

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