EXCLUSIVE-UK export credit agency to review Iran cover after nuclear deal

* Review could be a first step to normalising trade

* But UKEF says Iran would need to address arrears

* Lawyer sees no big change to sanctions for 6-9 months (Adds comment, detail, background)

By Jonathan Saul

LONDON, July 16 (Reuters) - Britain's export credit agencyis planning to review Iran's creditworthiness, it said onThursday, one of the first steps to normalising trade betweenthe two countries after this week's nuclear deal between worldpowers and Tehran.

With just under 80 million people and annual output of some$400 billion, Iran is set to be the biggest economy to rejointhe global trading and financial system since the break-up ofthe Soviet Union over two decades ago.

But many sanctions on the country look set to remain formonths. U.S. and European banking restrictions, for example,will be lifted only when the International Atomic Energy Agencyhas verified that Iran is keeping to its side of the nuclearbargain.

"We will be initiating a review of Iran to assesscreditworthiness, in light of the new agreement, and theexpected positive effect on the Iranian economy," UK ExportFinance (UKEF), which provides guarantees to banks and insuranceto support British exporters, told Reuters.

"UKEF has outstanding claims on Iran and we would expectthese arrears to be regularised to a large degree before wewould be in a position to restore full cover," it added.

A spokeswoman said there was no specific timeframe for thereview and declined to provide further details on the arrears.

Prior to the sanctions, Britain was a major trading partnerwith Iran.

London listed oil major Shell said this week it wasinterested in doing business in Iran, one of the world's top oilproducers.

Parts of Britain's lucrative financial services industry --which includes the Lloyd's of London insurance market -- willalso be vying for business.

But Britain faces competition.

Italy's export credit agency SACE said on Tuesday a graduallifting of sanctions could lift Italian exports to Iran byaround 3 billion euros ($3.3 billion) in the next four years.

British banks will also be cautious about doing business inIran given past experiences, industry sources said.

UK banks are pulling out of controversial businesses andslimming international operations in response to recentscandals. HSBC was fined $1.9 billion in 2012 by U.S.regulators for violations including doing business with Iran,while Standard Chartered in 2012 paid U.S. authorities$667 million for violating U.S. sanctions and then a further$300 million after more compliance shortcomings were uncovered.

Britain said in an updated trading note on Tuesday that: "IfIran adheres to its commitments and sanctions are rolled back,then the government will help the business and financial sectortake advantage of the opportunities that arise, and promotetrade and investment between our two countries."

Foreign minister Philip Hammond added on Wednesday thatBritain remained committed to re-opening its embassy in Iran.

Nigel Kushner, a director with the British Iranian Chamberof Commerce association, said trade prospects would depend onIran complying with a "multitude of obligations".

"The reality is that there will be no tangible change in theEU or U.S. sanctions regime for at least six to nine months atbest," said Kushner, a leading London-based sanctions lawyer.

($1 = 0.9203 euros) (Additional reporting by Steve Slater; Editing by Jason Neelyand Mark Potter)