Pipeline will help Iran in its nuclear push, so drop plan: US to India

The New York Times reported today that the Bush administration has quietly been warning energy companies, including Shell, Repsol and SKS, the Malaysian oil company, as well as the governments of China, India, Pakistan and Malaysia, that penalties are possible if they pursue energy deals with Iran.

As a result, several huge projects planned for Iran could be vulnerable. These include one possible $10 billion project by Royal Dutch Shell and the Spanish oil company, Repsol YPF, to develop a natural gas field offshore in Iran, and a $20 billion venture by SKS Ventures of Malaysia to produce natural gas in Iran’s Golshan and Ferdows fields.

In recent months, the administration has tried to avoid diplomatic or political controversies as a result of its jawboning. But the potential for sanctions is posing a quandary for the administration by setting up a possible fight with Europe if it proceeds with them or a fight with Congress if it does not.

One factor behind the warnings, administration officials acknowledge, is that the Democratic-controlled Congress appears to be moving quickly to pass a law that would make sanctions mandatory out of concern about Iran’s suspected nuclear arms programme and support for terrorism. “What we’re trying to do is create multiple points of pressure on Iran in both the private and public sector,” said R Nicholas Burns, Undersecretary of State for Political Affairs. “These companies also need to know that the attitude of Congress on their activities in Iran is hardening.”

Last month, the US ambassador to Spain, Eduardo Aguirre Jr., met with Repsol executives in Madrid to advise them against going forward with a deal to develop Iran’s South Pars field, which contains one of the world’s biggest natural gas deposits. The ambassador was told that the deal was not yet final, according to American and Repsol officials.

The messages to oil companies mark the latest episode in a long campaign of pressure that reached a turning point in December, when the administration won approval of a UN Security Council resolution designating 10 Iranian companies and a dozen individuals as off-limits for international financial dealings.

Another resolution designating an additional 15 individuals and 13 Iranian government and business groups, including a leading Iranian bank, could be approved later this week. The administration, using the Security Council list, wants virtually all of the world’s banks and businesses to boycott all of these Iranian entities.

Despite the stepped up American pressure, some Democratic leaders in Congress are complaining that the administration has not gone far enough. They want Bush to invoke a statute enacted in 1996 that obliges the US government to punish any foreign energy company doing business with Iran unless the president waives the sanction on national security grounds. “This administration has done nothing to punish Iran,” said Rep. Tom Lantos, D-Calif., who is chairman of the House Foreign Affairs Committee. “The method I don’t favour on Iran is to bomb their nuclear facilities. The method I favour is to starve them of resources, which can only be done through sanctions.”

After the bill passed a decade ago, European governments and companies vehemently objected, charging that it amounted to a brazen case of extra-territoriality, the term for one nation imposing its laws on foreign companies and sovereign nations. At the time, President Clinton, acting to avoid a confrontation with Europe and in part to send a conciliatory message to Iran when moderates seemed to be vying for power, waived the sanctions on several European companies, including Total, the leading French oil concern.

Recalling that precedent, Lantos said his bill would strip the president of the ability to waive sanctions on Iran on national security grounds. The Bush administration opposes that provision as a weakening of presidential prerogatives in foreign policy.

A spokesman for House Speaker Nancy Pelosi said that she supported Lantos’ bill. Lantos says he is confident he can persuade lawmakers to pass his bill with a big enough majority to override a presidential veto.

The existing sanctions law gives Washington the option to choose among several penalties, including denial of government credits to companies that deal with the foreign oil company, denial of export licenses and a ban on US government procurement or imports from these companies.

Administration officials say the reason no decisions have been made on whether to invoke or waive sanctions is that the energy exploration deals by Shell, Repsol, China, Malaysia and Pakistan are all still in an embryonic stage and that it is better to head them off by using persuasion than penalties.

But they also say that the administration does not want to take any action now that would divide the US from its allies in Europe on Iran, or to provoke China, India and Pakistan, whose support Washington needs for other foreign policy objectives.