* Iranian cargo shipping company under sanctions until 2016
* London IPO would be first for Iran since 1979 Islamic Revolution
* Listing unlikely for now due to U.S. sanctions' impact on banks
By Jonathan Saul and Parisa Hafezi
LONDON/ANKARA, March 13 (Reuters) - Iran's top cargo shipping company has held meetings in London to discuss a possible listing on the London Stock Exchange, but has so far been thwarted by U.S. sanctions that still scare banks off Iranian business, four Iranian and two Western sources said.
Islamic Republic of Iran Shipping Lines (IRISL) was removed from international sanctions blacklists last year and after years of isolation aims to raise funds to modernise its fleet. It has already placed an order for new ships estimated to be worth $626 million.
A floatation on the LSE would make it the first Iranian company to list on Britain's main exchange since the Islamic revolution in 1979.
But the difficulty in achieving such a landmark shows how far Tehran still remains from its goal of integrating fully with the global economic mainstream, since its 2015 deal with world powers to lift international sanctions in return for curbs on its nuclear programme.
President Hassan Rouhani, who faces a campaign for re-election in May, has struggled so far to demonstrate to voters real economic benefits from the deal. He won office in a landslide in 2013 on a promise to reduce Iran's isolation, and the nuclear deal is his crowning achievement.
Most international sanctions on Iran were lifted last year as a result of the nuclear deal. But the United States still has separate sanctions in place over Iran's missile programme and the administration of new President Donald Trump has signalled it would take a tough line.
The four Iranian officials and two Western financial sources told Reuters the Iranian company had expressed interest in an LSE listing. Two of the Iranian sources, both senior officials in Tehran, said meetings had already been held with the LSE in London about a possible float for IRISL.
IRISL officials could not be reached for comment. The LSE declined to comment.
All six Western and Iranian sources spoke on condition of anonymity to discuss an initiative that has not officially been made public.
Experts on sanctions say any Iranian IPO in London would run up against the impact of the remaining U.S. measures, which have deterred British-based banks from clearing payments or facilitating transactions for Iranian companies.
Even the UK subsidiaries of Iranian banks with British licenses have yet to offer payment clearing services in sterling.
"In the current climate, I believe it is wholly unrealistic for IRISL to expect to pull off a listing in London," said Nigel Kushner, a leading London-based sanctions lawyer.
"In circumstances where no UK clearing bank is willing to become involved and when Iranian banks that may legitimately trade in London are still not able to clear their transactions in London, how on earth is a listing going to happen?"
The sources did not say how much capital IRISL was seeking to raise in a potential initial public offering.
During the height of sanctions, the United States and European Union blacklisted the shipping firm, accusing it of involvement in nuclear proliferation efforts, which it denied. A European Union court ruled in 2015 that the EU had not given valid reasons for the allegations against IRISL.
IRISL's ambitions to become a big global cargo carrier are constrained by the age of its fleet. It operates 26 ships, worth just $166 million, according to ship valuation company VesselsValue. IRISL placed an order in December for 10 ships with South Korean shipbuilder Hyundai Heavy Industries Co Ltd. Those ships would be worth $626 million, according to VesselsValue.
If it is still too difficult to hold an IPO in London, Iranian companies, including from the telecommunications sector, could turn instead to Italy's stock exchange for a potential listing, Iranian sources said.
The Italian stock exchange, Milan's Borsa Italiana, is part of LSE Group. Borsa Italiana declined to comment.
For Iran, pressures to show more progress are mounting ahead of the country's presidential election in May. Hardline opponents say Rouhani has failed to win an economic windfall from his nuclear deal, and some voters are losing patience.
"Despite Rouhani's and his government's efforts, almost all banking transactions are blocked," said one senior Iranian banking official.
"This will impact the upcoming election and as you see hardliners have been using it against Rouhani in the past few weeks. Without foreign investment and the financial backing of major international banks, Iran's economy cannot recover." (Editing by Peter Graff)