U.S. warns French energy firm against $2 billion deal with Iran Total may be subject to sanctions of a law denounced by Paris, EU

PARIS — PARIS -- In a head-on challenge to U.S. efforts to economically hobble Iran, a French-led consortium has signed a $2 billion investment deal to develop a giant natural gas field in the Persian Gulf. The United States reacted swiftly yesterday, saying it will take action if the deal violates U.S. law.

"We regret this decision by [French energy giant] Total. We will investigate whether this violates the embargo law. We will apply the law," State Department spokesman James P. Rubin said at the United Nations, where Secretary of State Madeleine K. Albright is attending the opening of the General Assembly.


A 1996 U.S. law imposes sanctions on foreign companies that invest significantly in the Iranian and Libyan energy sectors.

French and European officials quickly lined up behind Total, warning the Clinton administration that it would be risky and wrong to retaliate against the company over the weekend deal.


"The application of the dispositions of this law would in effect constitute a grave precedent," said Jacques Rummelhardt, the French Foreign Ministry spokesman.

Peter Guilford, a spokesman for the 15-nation European Union in Brussels, Belgium, echoed that U.S. countermeasures would be "illegal and unacceptable."

But Mike McCurry, the White House spokesman, said any U.S. reaction would not be altered if the EU supports the contract.

As for the imposition of sanctions, McCurry said: "I'm not prepared to make an announcement, but it's safe to assume that those who are responsible for implementing that law have followed this transaction carefully. And our argument [is that] the proceeds that develop from oil and gas exploration are used in Iran's unrelenting state-sponsored support of terrorism."

Thierry Desmarest, Total SA's chairman, rejected the rationale behind the punitive U.S. legislation, contending in a newspaper interview published yesterday that, "These stories of financing of terrorism [by Iran] are absurd."

The U.S. law, sponsored by Republican Sen. Alfonse M. D'Amato of New York, was enacted in August 1996 in an attempt to minimize foreign investment in Iran or Libya, two militantly Islamic countries accused by the United States of international terrorism.

The act provides for sanctions for any company investing $40 million or more in the oil and gas industries of Libya or Iran.

"We're telling companies that invest in the oil sector of Iran or Libya: You can either do business with these countries or with us. You can't do both at once," said Gregg Rickman, D'Amato's chief legal adviser, to business leaders in France in June.


The U.S. legislation and another law designed to regulate outside investment in Communist-ruled Cuba have raised the hackles of many Europeans, who regard them as outrageous examples of the United States throwing around its economic weight to force other countries to join its ideological crusades.

"The D'Amato law is American," Rummelhardt said. "It applies in the United States and to American enterprises." Only the U.N. Security Council, the French official said, can impose international sanctions.

The agreement signed Sunday in Tehran with the National Iranian Oil Co. concerns development of an offshore natural gas field, Pars South, in the Persian Gulf. The field, under more than 230 feet of water, contains gas reserves of an estimated 10 trillion cubic yards, making it one of the largest.

Total, the world's seventh-largest energy company, will own 40 percent of the consortium, with the remaining 60 percent equally shared between Gazprom, Russia's leading energy company, and Petronas, a Malaysian company. Annual production is estimated to reach 26 billion cubic yards, a quantity that would be equivalent to half of all of the natural gas consumed in France, after the field comes on line in 2001.

Desmarest, Total's chairman, downplayed the impact of possible U.S. countermeasures over the deal. Under the law, President Clinton could choose two penalties from a menu of six, ranging from a ban on exports to the United States to denying an export license to use American-made goods.

Desmarest said Total's U.S. subsidiary, Topna, merged just last week with an American energy company, Ultramar Diamond Shamrock, and that Total only owns 8 percent of the result. That, he said, makes Ultramar an unlikely target for U.S. retaliation.


Pub Date: 9/30/97