WASHINGTON Mar 08, 2007 (Dow Jones Newswires)
The U.S. State Department on Wednesday warned that international companies investing in Iran face an increasing business risk given heightened chances for harsher sanctions amid efforts to halt Iran's alleged nuclear weapons program.
"We are in a different atmosphere with respect to risk involving Iran, and what we are encouraging businesses to do is to take a hard look at with whom they are dealing," State Department spokesman Scott McCormack said in a daily press briefing.
McCormack said the business risk for companies considering or conducting business with Iran is increasing, particularly because "there is every prospect (Iran) will find themselves under additional sanctions in the not-too-distant future." The U.N. Security Council is considering a second, tougher resolution following Iran's refusal to stop uranium enrichment.
McCormack's remarks follow testimony Tuesday in the House Foreign Affairs Committee by Under Secretary of State Nicholas Burns that the Bush administration had told oil company executives and heads of state the U.S. is "vigorously opposed" to any oil or gas deals with Iran, and its talks on the deals were designed to prevent deals from being finalized.
Furthermore, Committee Chairman Tom Lantos, D-Calif., unveiled legislation that would force the Bush administration to enforce the Iran Sanctions Act, which would penalize any foreign company investing more than $20 million in Iran. So far, the administration has used its waiver authority for violators in favor of diplomatic leverage.
McCormack said Wednesday companies should "also keep in mind that the United States has a responsibility to enforce its laws and to enforce its regulations."
The State Department spokesman said there have been myriad cases of Iran setting up front companies that have been making purchases on behalf of "all sorts of missile programs, WMD programs, and potentially involved in other types of illicit activity."
McCormack also said none of the Security Council members was seeking a full-blown sanctions resolution. On Tuesday, Burns said the U.S. would likely seek a reduction in export credits that have been offered by countries in support of business dealings with Iran.
If passed, Lantos' legislation would sanction companies - such as Royal Dutch Shell (RDSA), Repsol YPF (REP), Statoil (STO), Norsk Hydro ASA (NHY), Australia LNG, and China's National Offshore Oil Corp. (CEO) - that are preparing to sign several major oil and gas deals.
Shell and Spain's Repsol in January signed a preliminary $10 billion agreement with the Iranian government to develop two phases of the huge South Pars gas field. Many other companies are mulling Iranian offers of onshore and offshore blocks for development of hydrocarbons.
Besides tough Security Council sanctions, the Bush administration has been focusing its economic-sanction efforts against the financial sector.
The U.S. Treasury recently created a terrorism financial intelligence team, which has been able to persuade major banks such as Credit Suisse (CS) and HSBC (HBC) to stop their financial interactions with Iranian banks because of the reputational risk involved. The Treasury also has prohibited U.S. dollar transactions with two Iranian banks it linked to terrorism and supporting the current regime.
Copyright (c) 2007 Dow Jones & Company, Inc.
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