The United States vowed yesterday to enforce its tough Iran sanctions law over a deal between Tehran and the French oil company Total.
The US law, aimed at curbing trade with Iran, "is the law and we will apply it fully", a State Department spokesman, Christopher Bush, said.
Earlier in the day France warned the US against any retaliation over the $2bn (pounds 1.17bn) gas contract signed by Total to develop the giant South Pars Iranian offshore gas field.
Mr Bush said: "Our position on any investments in Iranian gas and oil fields is clear: Such investments make more resources available for Iran to use in supporting terrorism and pursuing missiles and nuclear weapons."
On the Total deal, he said, "we will review all information closely and take whatever action is appropriate under the law". The contract, won by Total and its consortium partners Petronas of Malaysia and Russia's Gazprom, flies in the face of the 1996 Iran-Libya Sanctions Act requiring President Bill Clinton to penalise any foreign company investing significantly in those two countries.
Jacques Rummelhardt, spokesman for the French foreign ministry, said that the US should "weigh carefully the consequences of implementing" the so-called d'Amato law, which calls for sanctions against US and foreign firms which invest more than $40m in the Iranian and Libyan oil and gas industries.
The Total deal was seen as an overt challenge to Washington, which had expressed its displeasure at Total's negotiations with Iran and threatened the French firm with sanctions if a deal were struck.
"Sanctions valid under international law are those taken by the UN Security Council," said Mr Rummelhardt. "France hopes the American administration will use the margin for manoeuvre which this law allows."
The sponsor of the US law, Republican Senator Alfonse d'Amato, has made the Total deal a test case, saying he will demand the toughest sanctions possible against the French firm's operations in the US.
Peter Ludlow, director of the Centre for European Policy Studies in Brussels, said: "There is a lot of combustible material about in transatlantic relations. Transatlantic trade disputes have always been combustible."
The Total chairman, Thierry Desmarest, told Le Monde he had the full support of the French government and the European Commission.
The deal comes at a sensitive time in US-EU trade ties. The EU has suspended a complaint to the World Trade Organisation against American laws punishing foreign firms which deal with Iran and Cuba, setting a 15 October deadline for an agreement.
But Brussels, which has ordered European firms not to comply with the Cuba laws, could revive its case if Washington took action over Total.
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