Support growing for wider trade curbs on Iran

May 5, 2007 - 0:0
WASHINGTON (Reuters) -- Support is growing in the United States and Russia for action that would require European companies to curb business in Iran as a means of pressuring Tehran to end its nuclear programs, U.S. and other diplomatic sources said on Thursday.

U.S.-led efforts to discourage international banks from doing business with Iran have proven effective but many Iranian industrial sectors -- including automotive, chemical, telecommunications and energy -- benefit from the heavy involvement of European and other foreign companies, they said.

Major powers -- including the United States, the European Union, Russia and China -- are trying to draw Iran into negotiations about its nuclear program but the lack of progress has prompted renewed talk of a third UN sanctions resolution, following on two others passed in December and March.

One diplomatic official, who briefed reporters on condition of anonymity, said Russia has signaled it will not back a third UN Security Council resolution imposing new sanctions on Iran -- like an arms sales embargo -- unless Europeans bear more of the burden.

He said this is believed to mean European companies must restrict new oil and gas investment as well as other business activities and European governments would have to end export credits and loans.

Russia, which has long-standing ties with Iran, has argued that it has suffered more from sanctions on Iran than other countries. It built Iran's nuclear complex at Bushehr but has delayed completing the project and providing fuel.

Many European governments have said they are reducing future export credits for business in Iran and the March UN resolution encourages countries to do this.

But while some countries are deeply conflicted about restricting business with Iran, one European diplomat noted that Europe has been inching toward a mandated cutoff of export credits and loans and that he expected such a sanction was inevitable.

Although U.S. law prohibits U.S. trade with Iran, European civilian trade with Iran is legal, so when the UN Security Council "moves into the civilian trade area, there's a lot more at stake," said Kenneth Katzman, Middle East expert at the Library of Congress' Congressional Research Service.

Spokesmen for the U.S. State Department and Treasury Department, who are heavily involved in building economic and political pressure on Iran, said they had no statistics about the extent of European and other foreign business with Iran.

Companies actively involved in business with Iran include DaimlerChrysler and Fiat in the automotive field, and Royal Dutch Shell Plc and France's Total in the energy sphere.

The U.S. Iran Sanctions Act mandates penalties on European and other foreign companies that invest more than $20 million in Iran's energy sector.