UPDATE 1-Germany arrests 4 men suspected of busting Iran embargo

>

By Madeline Chambers

BERLIN Aug 15 (Reuters) - German police have arrested four men suspected of delivering valves for a heavy water reactor to Iran, breaking an embargo on such exports to the Islamic Republic imposed over its disputed nuclear programme.

Prosecutors said some 90 customs officers arrested the men, a German and three with dual German-Iranian citizenship, at their homes in the northern cities of Hamburg and Oldenburg and the eastern town of Weimar, and searched flats and offices.

"In 2010 and 2011 the suspects are believed to have helped in the delivery of special valves for the construction of a heavy water reactor in Iran and therefore to have broken the Iran embargo," prosecutors said in a statement on Wednesday.

They did not name the plant, but Iran is building a heavy water research reactor near the central town of Arak, a type which Western experts say could produce plutonium for nuclear weapons.

Iran, which has said it hopes to bring Arak on line by the end of 2013, says its nuclear programme is entirely peaceful and that the reactor will produce isotopes for medical and agricultural use.

To avoid export controls, the men are suspected of having described their customer as a firm based in Turkey and Azerbaijan.

"The deliveries were part of an order worth several million euros (dollars) which Iran was trying to use to secure the necessary valve technology to make a heavy water reactor," said the prosecutors.

The men were therefore suspected of breaking Germany's law on foreign trade and breaching military weapons controls.

SANCTIONS SLOWING NUCLEAR ADVANCES?

Prosecutors named the men only as Kianzad Ka., Gholamali Ka., Hamid Kh. and Rudolf M. Customs officials also searched the property of another suspect in the eastern town of Halle/Saale as well as that individual's business.

A Washington-based think-tank, the Institute for Science and International Security (ISIS), said Iran's aim to start operating Arak in 2013 could be "delayed because of problems acquiring necessary items overseas or in building the reactor".

Analysts say increasingly tough sanctions and suspected sabotage are slowing Iran's nuclear advances.

Once up and running, the Arak reactor could produce about 9 kg of plutonium annually, or enough for about two nuclear weapons each year, if operating optimally, ISIS said on its website.

Iran has been hit with several rounds of U.N. sanctions, plus tougher measures imposed by the European Union and United States, since 2006 due to its refusal to suspend enrichment of uranium, a process that yields fuel for nuclear power stations but also nuclear bombs, depending on the level of refinement.

The world's No. 5 oil exporter, says it does not want to build a bomb but rather needs nuclear energy for electricity to meet the needs of a rapidly expanding population.

On Tuesday, Standard Chartered Plc reached a $340 million settlement with New York's bank regulator for transactions linked to Iran although the bank may still face investigations into transactions by other U.S. agencies.

The New York Financial Services Superintendent had this month accused Standard Chartered of breaking U.S. sanctions on Iran, saying it had hidden Iran-linked transactions worth a total of $250 billion from regulators. (Additional reporting by Fredrik Dahl in Vienna; Editing by Louise Ireland and Mark Heinrich)

Financials Industrials Related Quotes and News Company Price Related News