By Elias Biryabarema

KAMPALA, Sept 15 (Reuters) - Uganda has been unable toobtain a $46 million credit offered by Iran because ofcomplications in transferring the money due to U.N. sanctions,according to a government memo seen by Reuters on Wednesday.

Over the past two years, Iran has been strengtheningrelations with the east African country, which is set to becomean oil producer in 2011, and there have been reciprocal statevisits by the nations' leaders.

According to a Ugandan foreign ministry source, Iran offereda $10 million credit in 2008 to boost trade and investment withUganda and that credit was increased to $46 million whenPresident Mahmoud Ahmadinejad visited Kampala in April.

However, a memo prepared by the ministry for parliament'spublic accounts committee, in response to an audit query, saidsanctions had complicated the money transfer.

"The ministry has followed up the implementation of thisline of credit. However, it has faced challenges, especiallyfollowing the imposition of sanctions on Iran," said the memo.

"In a bid to overcome the difficulty in transferring fundsto and from Iran because of sanctions and to promote investmentand trade, the two countries agreed on the establishment of abank as a joint venture as the best way forward," it said.

Led by Washington, new sanctions imposed on Iran in Julytarget financial services and the energy sector, makinginternational transactions harder and hitting Iran's ability toimport gasoline and secure foreign investment.

The measures are aimed at pressuring Tehran to curb nuclearactivities which the West fears might be aimed at making a bomb.

The memo said Uganda had signed a memorandum ofunderstanding with the Export Development Bank of Iran (EDBI) onthe joint banking project but did not give details on when theinstitution was expected to be up and running.

During President Yoweri Museveni's visit in May 2009, Iranoffered to help Uganda develop its new petroleum sector,including building a refinery. Iran has also promised to investin Uganda's agro-processing and ICT sectors.

Uganda discovered oil on its western border with theDemocratic Republic of Congo in 2006 and reserves are estimatedat 2 billion barrels. (Editing by David Clarke)