Big energy firms cut Iran ties under U.S. pressure

Date: 9/30/2010

By Andrew Quinn Andrew Quinn – Thu Sep 30, 4:50 pm ET

WASHINGTON (Reuters) – Four major European oil companies will abandon their Iranian activities voluntarily to avoid American sanctions designed to pressure Iran over its nuclear program, U.S. officials said on Thursday.

The decision by France's Total, Norway's Statoil, Italy's ENI and Royal Dutch Shell will help ratchet up pressure as Western powers seek to bring Tehran into new talks on an atomic program they fear is aimed at producing nuclear weapons, Deputy Secretary of State James Steinberg said.

"The international community should collectively abandon a business–as–usual approach to Iran," Steinberg told reporters, saying other major energy companies were under investigation and could face consequences if they do not follow suit.

Steinberg said the United States had already slapped new sanctions on a Swiss–based subsidiary of the National Iranian Oil Company, which he described as a conduit for hundreds of millions of dollars to Iran's energy sector.

While he declined to identify the companies being probed, Steinberg made clear that the United States was bringing pressure to bear as it seeks to squeeze Tehran's economic lifelines.

"We are engaging in conversations. We will sustain the confidentiality of those so long as we think it's productive," he told a news briefing.

A list of energy companies previously identified by the U.S. Government Accountability Office as doing business in Iran included Russia's Lukoil and Gazprom, China's CNOOC and CNPC, Brazil's Petrobras and other firms from Britain, Italy, South Korea, India, Austria, Germany and other countries.

The U.N. Security Council passed new sanctions on Iran in June, and the U.S. Congress followed by approving additional measures that seek to directly penalize Iran's energy and banking sector and to go after foreign companies that do business with Tehran.

Iran, which has resisted pressure to open wide–ranging talks over its nuclear ambitions, says that its nuclear program is peaceful and that while it is open to talks, it will never give up its right to peaceful nuclear energy.

The U.N. Security Council's five permanent members, the United States, Britain, France, Russia and China, are working with Germany to draw Iran back into negotiations that collapsed last year. But progress has been slow and U.S. officials describe sanctions as a way to pressure Tehran to talk.

"What we are focused on is to make clear to Iran that the consequences are linked to their behavior on the nuclear program and that there is a way forward for them to avoid those consequences," Steinberg said.


Steinberg said the new sanctions on Swiss–based Naftiran Intertrade Co –– a subsidiary of the National Iranian Oil Company –– would themselves deal a significant blow.

But other U.S. officials said most of the activity covered by the new sanctions was already barred by U.S. law and suggested their main consequence might be to dissuade non–U.S. companies from partnering with Naftiran.

The company channels "hundreds of millions of dollars for financing for development projects in Iran's petroleum sector, and sanctioning (it) today will further isolate the company from the international business community," Steinberg said.

Steinberg said Naftiran will be prohibited from receiving export assistance from the U.S. Export–Import Bank or private U.S. bank loans exceeding $10 million in any 12–month period and blocked from U.S. government procurement contracts.

The deal with the four international oil majors to curtail Iran activities set a precedent that other companies should follow, showing that the threat of sanctions was leaving Tehran increasingly isolated, Steinberg said

"People are increasingly reaching the conclusion that it's simply not worth it to engage in activities with Iran," he said.

Some energy analysts have suggested that a pullback by Western firms could present an opportunity for companies from Russia, China, or other countries to step in despite the blanket U.N. sanctions.

"The absence of any sanctions on Russian and Chinese companies is ... very conspicuous," Representative Ileana Ros–Lehtinen, the ranking Republican on the House Foreign Affairs Committee, said in a statement. "We know that these companies have long–standing involvement in Iran."

(Reporting by Andrew Quinn; Editing by Xavier Briand)


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