They say Brussels fears the U.S. moves could set Western allies against each other and undermine unity against Tehran over its refusal to halt uranium enrichment, which the West suspects is aimed at making nuclear weapons.
The main European powers say they are willing to join Washington in seeking tougher sanctions against Tehran at the United Nations.
But Brussels will fight any attempt to apply U.S. law unilaterally to punish European firms that invest in or trade with Iran, if necessary at the World Trade Organisation, the diplomats said, speaking on condition of anonymity.
The EU is particularly alarmed at a bill passed by the House of Representatives that would end a presidential waiver sparing European companies from U.S. sanctions on firms that invest more than $20 million in the Iranian oil and gas sector.
The waiver was enacted in 1998, ending a transatlantic row over efforts to apply U.S. legislation extra-territorially.
European officials say new EU investment in the Islamic republic is already dwindling because of the political risk and lack of finance for major projects, and exports to Iran are falling as governments and banks cut back trade credits.
The 27 EU countries exported goods worth 12.99 billion euros ($18.06 billion) to Tehran in 2005, 11.27 billion euros last year and 4.66 billion euros in the first half of this year, according to the EU statistics office Eurostat.
The biggest exporters were Germany, Italy and France. But in each case, the volume of trade is declining, the figures show.
RIDING ROUGHSHOD?
The daily Le Monde reported on Thursday the Paris government had told French companies working in Iran they should postpone new investments in the country. It cited a liquified natural gas (LNG) project involving French energy major Total (TOTF.PA: Quote, Profile, Research).
The concern in Brussels is that in the run-up to the 2008 U.S. presidential and congressional elections, politicians will be vying to propose harsher measures against Iran, at the risk of riding roughshod over European and Japanese allies.
If European companies are pressured to divest from Iran without a U.N. resolution, Russian and Chinese firms will simply take their place, business lobbyists say.
Other bills passed by the House call on the U.S. government to publicly list companies with more than $20 million invested in Iran’s energy sector, and to offer legal protection to fund managers who pull money out of firms doing business there.
The Bush administration has opposed the measures but EU officials fear it may not have enough influence in its final months in office to restrain the Democrat-controlled Congress, in which such legislation has broad bipartisan support.
Total’s investment in Iran’s giant South Pars gas field was at the heart of the mid-1990s transatlantic battle.
The Congressional Research Service recently reported more than $100 billion in energy investments in Iran since 1999 by foreign firms such as Total, Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research), Italy’s ENI (ENI.MI: Quote, Profile, Research) and Japan’s Inpex Holdings Inc. (1605.T: Quote, Profile, Research).
EU diplomats said the Congressional moves could harm transatlantic cooperation at a time when the United States and Europe are pursuing a joint approach in trying to contain Iran’s nuclear ambitions with a mixture of incentives and sanctions.
Total Chief Executive Christophe de Margerie has repeatedly said spiralling costs, as well as geopolitical concerns, are delaying the group’s involvement in the multi-billion dollar Pars liquefield natural gas project in Iran. But sources close to the situation have said the risk of U.S. sanctions on non-American companies that invest in Iran is a major factor.
“The problem for Total is one of image and behaviour as it would be difficult for them to justify investing in a country against the wish of the United States and the international community,” said an analyst, who asked not to be named.
“They are in a delicate position as they must not shut the door on Iran, so the official position that surging costs have to be renegotiated is a good excuse to buy Total some time, to see how things evolve politically in Iran.”~ (Additional reporting by Marie Maitre and Crispian Balmer in Paris and Louis Charbonneau in Berlin)
