Frustrating Washington's efforts to cripple the Iranian economy through an international sanctions regime, Tehran has "concluded gas deals with Chinese and Malaysian companies — ending a protracted lull in investment in its energy sector — and has alarmed Washington by reaching an agreement with a Swiss group," the Financial Times of London reported Wednesday.[1]  --  "The dilemma threatens to expose the limited U.S. influence over foreign companies strategic decisions," wrote Daniel Dombey, Anna Fifield, and Haig Simonian, because "[a]lthough Washington and its allies have convinced the United Nations Security Council to sign up to three sets of sanctions against Iran’s nuclear and missile sectors and banks, it has been unable to broaden such international measures into the key energy sector."  --  NOTE:  American "anger" about gas deals is put in perspective by the fact that although U.S. law sanctions non-U.S. companies investing in Iran's oil industry, “sanctions have not been imposed against European Union companies since 1998 because successive U.S. administrations have waived them on national security grounds,” as Ed Crooks and Stephen Fidler noted in a Jan. 24, 2007 article in the Financial Times....

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World

IRAN-EUROPE GAS DEALS ANGER WASHINGTON
By Daniel Dombey (Washington), Anna Fifield (Tehran), and Haig Simonian (Zurich)

Financial Times (London)
April 30, 2008

http://www.ft.com/cms/s/0/a473f7de-16d5-11dd-bbfc-0000779fd2ac.html

The U.S. and its allies are worried that the sanctions regime against Tehran is under threat from a possible new wave of European investment in Iran’s strategically important gas sector.

Tehran has already concluded gas deals with Chinese and Malaysian companies -- ending a protracted lull in investment in its energy sector -- and has alarmed Washington by reaching an agreement with a Swiss group.

The dilemma threatens to expose the limited U.S. influence over foreign companies strategic decisions.

Although Washington and its allies have convinced the United Nations Security Council to sign up to three sets of sanctions against Iran’s nuclear and missile sectors and banks, it has been unable to broaden such international measures into the key energy sector.

Until recently, informal U.S. pressure -- combined with the difficulties associated with doing business in Iran -- had appeared to dissuade many companies from signing formal contracts.

Now, the U.S. fears that a 25-year supply agreement concluded in March between Elektrizitäts-Gesellschaft Laufenburg (EGL) of Switzerland and Iran could encourage other deals, particularly in the gas sector, despite American calls for tougher sanctions against Tehran over its controversial nuclear program. The Swiss government says the deal could be worth up to 27bn euros ($42bn, £21bn).

“The worry is that the Swiss deal will lead others, such as the Austrians, to confirm energy investments in Iran, and that companies like [France’s] Total could then follow suit and sign contracts of their own,” said one Western diplomat. He pointed out that the EGL agreement ended a period in which European energy companies had largely confined themselves to agreeing only non-binding memoranda of understanding with Iran.

He added: “There is a lot of attention on sanctions on Iranian banks, but investment in the energy sector is much more important for Iran’s economy.” Iran has the world’s second-largest proven gas reserves, but exports far below its potential.

Flynt Leverett, a former U.S. National Security Council adviser on the Middle East, says pressure is growing on non-U.S. companies to conclude supply contracts with Iran in the wake of the deals already signed between Tehran and Sinopec of China and SKS of Malaysia.

So angry is Washington about the Swiss deal that it has suggested that Switzerland’s role as the U.S. representative in Cuba and Iran could be at risk.

Swiss officials reply that no international sanctions prohibit investment in the Iranian energy sector, and that the gas supply contract signed by EGL is intended to alleviate energy shortages in Italy. “For almost 30 years, Switzerland has rendered good services to the U.S. as their protecting power in Iran,” said a Swiss foreign ministry spokesman.

The website of the U.S. embassy in Bern carries a series of questions about the gas deal, explicitly raising the question of whether Switzerland’s role is “in jeopardy.” Officials there merely say that Switzerland has a mandate to represent the U.S. “at this time.”

Following the deal, some European leaders have voiced concern about new investment in liquefied natural gas, the sector in which groups such as Total, Royal Dutch Shell, and Austria’s OMV have struck preliminary agreements but have yet to sign formal contracts. Iran has warned such companies they need to conclude deals by June or it will look elsewhere for investment.

Gordon Brown, U.K. prime minister, said in the U.S. this month that he wanted to broaden sanctions over Iran’s nuclear program “to include investment in liquefied natural gas.”

At present, there are no such sanctions at either U.N. or E.U. level against investment in Iran’s gas sector.

European diplomats say it is unlikely that the E.U. will agree formal sanctions on the Iranian energy sector in the immediate future -- instead it is concentrating on measures against Iran’s Bank Melli. Foreign ministers from the five permanent members of the U.N. Security Council plus Germany meet in London tomorrow to discuss further action against Iran. Diplomats say Mr Brown’s words are an attempt to increase the political pressure against new investment in the sector.

Under U.S. law, investments of above $20m (13m euros, £10m) in Iran’s energy sector can lead to U.S. retaliatory measures. But Mr. Leverett said Washington’s options were limited. “The E.U. would effectively take us to court [at the World Trade Organization] and the U.S. would probably lose,” he said.

Hojatullah Ghanimi Fard, head of international affairs at the National Iranian Oil Company, said Tehran was legitimately supplying an international need. “Would it be wise to deprive common people of consuming countries of supplies from Iran?” he asked.