Iran General NewsOil companies in deals with Iran face sanctions

Oil companies in deals with Iran face sanctions


Reuters: Key members of the U.S. Congress on Tuesday backed a new legislative effort designed to force the Bush administration to sanction oil companies and countries that strike deals with Iran, but the State Department expressed concerns. By Carol Giacomo, Diplomatic Correspondent

WASHINGTON, March 6 (Reuters) – Key members of the U.S. Congress on Tuesday backed a new legislative effort designed to force the Bush administration to sanction oil companies and countries that strike deals with Iran, but the State Department expressed concerns.

The move comes as new multibillion-dollar oil and gas agreements with Tehran are under negotiation and as the U.N. Security Council debates expanding existing sanctions on Iran, which many U.S. lawmakers consider too weak.

Intensifying efforts to persuade Tehran to abandon its nuclear program, Rep. Tom Lantos, chairman of the House of Representatives Foreign Affairs Committee, said the only way to achieve this goal without military action is through diplomacy backed by strong international sanctions.

In remarks that drew support from Democratic and Republican colleagues, he accused the administration of abusing its authority by waiving penalties under the existing U.S. Iran Sanctions Act and promised “those halcyon days for the oil industry are over.”

“My legislation will increase exponentially the economic pressure on Iran, and empower our diplomatic efforts by strengthening the Iran Sanctions Act. It will put an end to the administration’s ability to waive sanctions against foreign companies that invest in Iran’s energy industry,” he said.

“If Dutch Shell moves forward with its proposed $10 billion deal with Iran, it will be sanctioned. If Malaysia moves forward with a similar deal, it too will be sanctioned. The same treatment will be accorded to China and India should they finalize deals with Iran,” the California Democrat said.

Florida Rep. Ileana Ros-Lehtinen, the panel’s senior Republican, said Iran’s economy is heavily dependent on the energy sector, adding, “We are at a critical juncture and the opportunity for successful application of our sanctions has never been greater.”

But Undersecretary of State Nicholas Burns expressed concern that if the U.S. focus shifts from working with European and other allies to expand sanctions on Iran, to imposing sanctions on U.S. allies and foreign companies, the international coalition arrayed against Iran could unravel.


Even if the Democratic-led House approved the bill, it could be torpedoed in the Senate, where Democrats have only a one-vote margin, or vetoed by President Georeg W. Bush. But it does reflect growing alarm over Iran’s determination to continue uranium enrichment in defiance of U.N. demands.

Shell said last month it signed a deal with Iran in conjunction with Spain’s Repsol to develop South Pars, the OPEC member’s biggest natural gas field, despite growing U.S. pressure not to invest in Iran.

China’s National Offshore Oil Corporation, Australian LNG Co., and Malaysia’s SKS are also in negotiations.

The Iran Sanctions Act, enacted in 1995, requires the U.S. government to impose sanctions on foreign companies that invest more than $20 million a year in Iran’s energy sector.

Burns said the administration has coordinated a series of diplomatic initiatives that has begun to “throw Iran off its stride” and urged Congress to be patient so they can work.

In addition to drafting a new U.N. sanctions resolution with major powers and cracking down on Iran’s access to financial markets, the administration has given new warnings to countries and foreign companies that they face penalties if they proceed with business deals with Iran, he said.

France, Germany and Japan have reduced export credits for Iran and other countries have privately committed to do the same, he said. Iran is one of the world’s largest beneficiaries of export credits with $22.3 billion in exposure reported by the Organization for Economic Cooperation and Development in 2005.

The United States and its allies suspect Iran is seeking to build nuclear weapons under the cover of a civilian atomic program. Tehran denies the charge.

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