Malaysian palm oil exporters have stopped supplying most of the 30,000 tonnes of the food staple Iran used to buy each month from the Southeast Asian producer.

The halt in Malaysia's palm oil exports, which the traders said started late last year, is the latest sign that sanctions aimed at persuading Iran to abandon a suspected nuclear weapons programme have started to bite.

The sanctions, spearheaded by the US and European Union, have made it difficult for Iranian palm oil buyers to use letters of credit and make payments via middlemen in the United Arab Emirates (UAE) to Malaysian exporters.

Malaysia is the world's No.2 producer of palm oil, used to make products from bio-diesel to cooking oil and confectionery.

'Most of the companies selling palm oil to Iran have stopped since the end of last year,' one trader with direct knowledge of the deals told Reuters on Wednesday.

'Payments are not coming through and no palm oil shipper wants to risk sending the cargoes to Iran with such a tense political situation,' added the trader, who declined to be identified due to the sensitivity of the issue.

Malaysia's Commodities Ministry and the Malaysian Palm Oil Council were not immediately available for comment.

The US slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem Iran's oil revenues.

Iran, with a population of 74 million people, is finding it difficult to repatriate the hard currency from crude oil exports -- the major earner of the foreign currency it needs to pay for shipments of food and other imports.

Iranian buyers defaulted on payments for about 200,000 tonnes of rice from their top supplier India, exporters and rice millers told Reuters on Tuesday. Ukrainian and European traders said they were no longer booking Ukraine grain shipments to Iran because of the payment difficulties, the country's farm minister said.

Malaysia fills about half of Iran's palm oil needs and last year it exported 342,256 tonnes, making it a key supplier, along with Indonesia -- the world's largest producer.

The traders in Kuala Lumpur said some Iranian buyers had continued to make enquiries, mostly for crude palm oil cargoes.

'They keep asking in the spirit of Muslim brotherhood. The last I heard was an enquiry for 5,000 tonnes for February or March delivery, but no one wants to take that risk now,' a second trader said.  - Reuters