U.S. To See If CNOOC-Iran Deal Violates Sanctions

The U.S. State and Treasury departments will look into whether a $16 billion gas deal that China's national oil company reportedly has signed with Iran violates U.S. sanctions law, a State Department official said Wednesday.

The Iranian oil ministry's official Shana Web site said Tuesday that the country was expected to sign a $16 billion contract to develop its North Pars gas field with China National Offshore Oil Corp., or CNOOC, on Wednesday.

CNOOC is the parent of Hong Kong- and New York-listed CNOOC Ltd. (CEO).

In addition to a sanctions process underway in the United Nations Security Council, the U.S. has ramped up some of its sanctions against Iran to force the country to allow transparent inspections of its nuclear enrichment facilities.

"As a matter of general policy, we don't believe now is the time to be making new investments in Iran, whether that's in the energy sector or in anything else," State Department spokesman Thomas Casey said at press briefing.

While the State Department has yet to apply punitive measures against companies under the U.S. Iran Sanctions Law, the Treasury Department has actively--and successfully--pursued sanctions against financial transactions with several of Iran's largest banks.

As part of its operations, the Treasury Department last year designated a slew of Iran's largest banks and affiliates of the Islamic Revolutionary Guard Corps, or IRGC, as supporters of terrorism or weapons of mass destruction.

Among the designations are a group of petroleum, construction and engineering companies owned or controlled by the IRGC that are responsible for major oil and gas projects in Iran. They include Khatam-al-Anbiya Construction Headquarters, or GHORB, and an exploration and production unit, Oriental Kish Oil.

"To the extent that this deal raises any questions about (sanction laws), I'm sure people will look at it," Casey said, adding that while the State Department would conduct a small portion of the review, the vast majority of any probe would be pursued by Treasury investigators.

The new Iran-CNOOC agreement aims at developing the field to produce 4.8 billion cubic feet a day of natural gas, with CNOOC to invest $5 billion in upstream projects and $11 billion in liquified natural gas facilities, Shana said.

A Treasury Department spokesman wasn't immediately available for comment.

Copyright (c) 2008 Dow Jones & Company, Inc.


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