European Oil Firms Poised to Defy U.S. Policy on Iran

European oil companies are poised to defy U.S. sanctions aimed at curbing foreign investment in Iran’s oil and gas industry.

Such action would not only bolster Iran’s economy — and, potentially, its nuclear weapons program — but also undermine American policy.

Both Israeli and U.S. intelligence officials estimate that Iran will have nuclear warheads and ballistic missile delivery systems capable of striking Middle East, European and U.S. targets within two to five years.

European and Iranian sources confirmed over the weekend that European companies –acting alone or as part of major international consortiums — are close to striking deals with Iran in the oil and gas sectors.

One leading contender for future contracts is the British/Dutch-owned Shell group, which confirmed that negotiations to export gas from Iran are under way.

“I can tell you there will be several more signings in the near future,” said a source.

Other European companies are reportedly eager to strike deals with Iran as soon as possible in a bid to pre-empt potential U.S. commercial involvement in the event of a diplomatic breakthrough between Washington and Tehran.

Iran has been vigorously encouraging foreign investment in its oil and gas industry to ease the chronic underinvestment in both onshore and offshore projects.

It is particularly interested in capital investments in order to develop gas reserves that can be used to boost production in its severely depleted oil fields.

Iran is also anxious to exploit the current diplomatic division between the United States and Europe — particularly France — over possible military strikes against Iraq.

At the same time, there are expectations in some European quarters that Britain’s support for an offensive against Iraq and France’s tacit acquiescence could be used as lever to persuade the United States to relax its sanctions legislation against European companies.

Meanwhile, European industrialists and governments are closely monitoring what, if any, action the United States takes against the French oil giant Total, which last year joined with Russia’s Gazprom and Malaysia’s Petronas in a $2 billion deal to develop an Iranian gas field. The U.S. decision is expected later this month.

European involvement in Iran’s oil and gas industries openly contravenes the Iran-Libya Sanctions Act, which contains provision to penalize foreign companies that invest more than $20 million in those industries.

However, the European Union opposes the legislation on the grounds that it is “extraterritorial” and unjustly seeks to impose penalties on third countries.

Britain’s foreign secretary, Robin Cook, who currently holds the European Union presidency, said last week that E.U. foreign ministers believe that the policy of sanctions against Iran is no longer appropriate because of an apparently more moderate tone emanating from Tehran since the recent election of President Mohammed Khatami.

Speaking after a meeting of E.U. foreign ministers in Brussels, Cook said the 15-member bloc agreed with Washington that Iran must be stopped from acquiring weapons of mass destruction and from sponsoring terrorism, but this goal could be achieved by blocking the sale of weapons and technology, while sharing intelligence on terrorist activities.