Reluctance in Europe for sanctions on Iran

From the Washington Post, Thursday, March 11, 2010, by Steven Mufson:

Congress and the Obama administration are stepping up pressure on private companies to stop doing business with Iran, but their efforts are running into  ...reluctance in Europe and a host of elusive trading companies eager to sell gasoline and other goods to Iran.

To deter Iran from developing a nuclear weapons program, the House and the Senate have approved separate bills that would impose sanctions on companies that supply gasoline to the Islamic republic and on the insurance, reinsurance and shipping companies that facilitate such trade. And in the past few weeks, a variety of companies -- including Ingersoll Rand, Caterpillar, Siemens and Huntsman -- have indicated they will stop or have stopped doing business with Iran.

But a senior European Union official has written to Secretary of State Hillary Rodham Clinton voicing opposition to congressional efforts to impose U.S. sanctions on European companies.

In a Feb. 26 letter, Catherine Margaret Ashton, the E.U.'s high representative for foreign affairs and security policy, expressed "the EU's deep concern" about the bills because they "envisage the extraterritorial application of U.S. legislation and would therefore be contrary to the EU-U.S. understanding of 1998, under which it was agreed that such sanctions would not be applied to the EU in the light of the EU's commitment to work with the U.S. to counter the threat that Iran poses to international security."

The United States is trying to choke off the 130,000 barrels a day of gasoline that oil-rich Iran imports because it lacks adequate refining capacity.

News reports Wednesday said Royal Dutch Shell Group would no longer sell gasoline to Iran, though industry sources said Shell has not sold gasoline to Iran since last year. Trading giant Vitol also has said it would end gasoline sales to Iran.

But oil industry sources said that Iranian front companies were securing gasoline supplies from Abu Dhabi and Dubai in the United Arab Emirates and from Bahrain, and that some companies in Iraq were making purchases on Iran's behalf. "All you are doing is transferring sales from one company to another," said a trader in Kuwait.

As the United States seeks to rally international pressure, Iran has taken steps to wean itself from imports, which provide 40 percent of its gasoline supplies. Though gasoline there is still heavily subsidized, costing 38 cents a gallon, the government has cut quotas. The U.S. Energy Information Administration said Iran's refinery investments would make it self-sufficient by 2013. Iran also has been stockpiling gasoline; in January, the National Iranian Oil Products Distribution Co. said inventories rose by 3.77 million barrels in nine months, enough to supply all the country's needs for about a month.

"We've discussed ideas for putting additional pressure on Iran," said State Department spokesman P.J. Crowley, referring to talks among the five nations coordinating policy to deter Iran from acquiring nuclear weapons. He said the United States has zeroed in on energy and financial firms, telling them that "if they choose to do business with Iran, it can have commercial implications."