Tuesday, May 29, 2007

Economic Action Against Iran

Political Skullduggery in the form of Economic Action by the United States against the Islamic Republic of Iran is in the spotlight today.

The United States is piling pressure on European banks and energy firms to avoid doing business with Iran, sending a blunt message that reputations are at stake if they do so, officials and analysts said on Monday.

Washington, leading efforts to isolate the Islamic Republic over its atomic program, has slapped sanctions on two Iranian banks. United Nations sanctions have targeted one.

But U.S. arm-twisting may be having a stronger impact, with one bank withdrawing finance for a major gas deal and oil majors rethinking investment. A U.S. official warned multinationals in March to steer clear of OPEC's second biggest producer.

"The world's top financial institutions and corporations are re-evaluating their business with Iran because they are worried about the risk and their reputations," said Stuart Levey, the U.S. Treasury's top anti-terrorism official.

"You should worry too and be especially cautious when it comes to doing business with Iran."

French bank Societe General got the message and has pulled the plug on financing for a $5 billion project to develop part of Iran's massive South Pars gas field.

"SocGen has stopped their financial support because of pressure from the U.S.," Akbar Torkan, head of Iran's Pars Oil and Gas Company, said.

"No European bank is ready to prepare new financing for us. The U.S. is putting pressure on all European banks."

Iran is fighting back with plans to set up an overseas investment fund in Bahrain or Dubai to help finance South Pars.

Washington is working hard behind the scenes to ensure that Iran cannot raise the cash it needs.

"The U.S. government is sending out letters to banks on plain white paper with a clear message -- side with us or we'll make it difficult for you to operate," said an Iranian executive who wished to remain anonymous.

Iranian officials have brushed off the impact, but Torkan -- a former defense minister -- said major oil companies such as Statoil and Total were also being leaned on.

"They have to follow American policy, otherwise the U.S. will find tools to pressure them," he said.

"It's punishment for their activities in Iran."

Industry sources said Statoil may have second thoughts about developing the Azar oilfield because it is keen to protect its U.S. interests. Norsk Hydro was planning the Azar development, but Statoil bought Norsk's oil and gas assets in December and will own the concession when that takeover is complete.

Royal Dutch Shell, Eni and Total have all invested billions of dollars in Iran and also own U.S. assets. Top brass have indicated that political concerns could impact new investment plans.

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