[R-G] Iran-Europe Gas Deals Anger Washington

[Yoshie Furuhashi]

<http://www.ft.com/cms/s/0/a473f7de-16d5-11dd-bbfc-0000779fd2ac.html>
Iran-Europe gas deals anger Washington

By Daniel Dombey in Washington, Anna Fifield in Tehran and Haig
Simonian in Zurich

Published: April 30 2008 18:05 | Last updated: April 30 2008 18:05

The US 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 US 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 US pressure – combined with the difficulties
associated with doing business in Iran – had appeared to dissuade many
companies from signing formal contracts.

Now, the US 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 programme. The Swiss government says the deal
could be worth up to €27bn ($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 US National Security Council adviser on the
Middle East, says pressure is growing on non-US 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 US 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 US as their protecting power in Iran," said a Swiss foreign
ministry spokesman.

The website of the US 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 US "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, UK prime minister, said in the US this month that he
wanted to broaden sanctions over Iran's nuclear programme "to include
investment in liquefied natural gas".

At present, there are no such sanctions at either UN or EU level
against investment in Iran's gas sector.

European diplomats say it is unlikely that the EU 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 UN 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 US law, investments of above $20m (€13m, £10m) in Iran's energy
sector can lead to US retaliatory measures, But Mr Leverett said
Washington's options were limited. "The EU would effectively take us
to court [at the World Trade Organisation] and the US 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.

-- 
Yoshie
<http://montages.blogspot.com/>