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Austria denies Iranian exile allegation of sanctions avoidance

VIENNA (Reuters) - Austria on Tuesday dismissed as "unfounded" allegations by an Iranian exile group that the Islamic Republic may be using banks in the European Union member state to help it avoid international sanctions.

The People's Mujahideen Organisation of Iran (PMOI) - which the United States in September removed from its official list of terrorist organizations - said Austria was among countries "that the regime has chosen to skirt sanctions" in Europe.

It said the head of an Iranian government agency seeking ways around punitive measures on Tehran had been working with Iran's "lobby network in Austria in various fields for more than eight years and has set up a widespread network".

PMOI cited the senior Iranian official - whom it named - as saying in an internal report that Iran was in contact with some groups in Austria regarding technology production and it was "also possible to use" banks there. It did not give details.

It said the official travelled to the Alpine republic in June for meetings with companies and others, and that two Iranians and two Austrians were among his "covert agents".

The activities in Austria and elsewhere were funded with cash sent via diplomatic mail, it said, adding the information was obtained by its "network" inside Iran.

Asked about the assertions, which the PMOI sent to Reuters in an e-mail, Foreign Ministry spokesman Alexander Schallenberg said they were "unfounded" and that money flows between the two countries had declined sharply.

Ministry checks with government and central bank officials showed that applications for money transfers and reported payments above 10,000 euros between Austrian banks and Iran had "fallen drastically in recent months". He gave no figures.

But an organisation representing Austria's Jewish community called for a thorough investigation and clear communication from the government regarding the PMOI's allegations.

"Given the growing nuclear threat to world peace from Iran, the government here has to act immediately," its head, Oskar Deutsch, said in a statement.

A spokesman for Austria's interior ministry said no criminal investigations were under way in the matter at present.

The 27-nation European Union - following the lead of the United States - has significantly ratcheted up the sanctions pressure on Iran this year in a bid to make it to curb nuclear work which the West fears is aimed at developing atomic bombs.

Iran says its nuclear program is entirely peaceful.

PMOI - also known as Mujahadin-e Khalq (MEK) - led a guerrilla campaign against Iran's U.S.-backed shah during the 1970s and now calls for the overthrow of the clerical leaders who took power after he was toppled.

Iran regards the group as a terrorist network.

A decade ago, PMOI exposed Iran's covert uranium enrichment facility at Natanz, but analysts say it has a mixed track record and a clear political agenda.

(Reporting by Michael Shields and Fredrik Dahl; Editing by Mark Heinrich)