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Austria courts Iran, angers US

Washington has protested an Austrian oil and gas firm's investment plans in Iran. However, the Americans won't have much influence on the deal, observers say.

OMV, Central Europe's largest oil and gas firm, announced last Saturday it had signed a memorandum of understanding with Iran to jointly develop parts of the gigantic South Pars gas field and cooperate with Iran in producing liquefied natural gas. The field would be explored by OMV, with LNG transported via container ships to a terminal to be built in Croatia; from there, the gas will be fed into the Austrian and Italian pipeline networks. The total value of the deal has been reportedly estimated by the Iranian Oil Ministry at $18 billion. With yearly sales of roughly $13 billion, OMV is a major player in Central Europe and has in the past explored in other politically sensitive countries, such as Libya. Yet what has excited Austrian investors has managed to irritate politicians across the Atlantic.

Earlier this week, Rep. Tom Lantos, D-California, chairman of the House Foreign Affairs Committee, warned OMV that under his legislation the company will not escape sanctions if it follows through on the deal to help develop the Iranian field. „I am outraged by news of OMV's energy deal with Iran, which shows utter contempt for the will of the international community,” Lantos said in a statement. „The UN Security Council is sanctioning Iran for the nuclear activities that this deal will clearly, if indirectly, support.” Under the US Iran Sanctions Act, foreign firms that invest heavily in Iran's energy sector - which supports its nuclear development programs - are subject to restrictions in dealing with the United States and US-based entities. „OMV will regret this action,” Lantos said. „It has already damaged its reputation and, if it follows through on the deal, I have no doubt it will be sanctioned, whether under the Iran Sanctions Act or the soon-to-be-enacted Iran Counter-Proliferation Act.”

The Counter-Proliferation Act, a bill authored by Lantos, aims to put an end to the Washington's ability to waive sanctions required by existing law against foreign companies that invest in Iran's energy industry and increases economic pressure on Iran by expanding the types of investment subject to sanctions, severely limiting the export of US items to Iran, ending all imports from Iran and preventing US subsidiaries of foreign oil companies that invest in Iran's oil sector from receiving US tax benefits for oil and gas exploration. Lantos is not the only one protesting. State Department spokesman Sean McCormack earlier this week announced that Washington will „talk to the Austrian government, talk to the firm involved and raise with them the idea that perhaps this not the most appropriate time to be making or committing to making large investments in the Iranian oil and gas sector.” The harsh words coming from the Americans have not managed to impress the Austrians, however.

Austria's Foreign Minister Ursula Plassnik said OMV had the right to do business with Iran. „The Americans may refuse to invest in Iran's oil industry,” she told the Austrian Die Presse newspaper. „But Austria is not bound by US law.” All major government politicians in Austria have sided with OMV, and so have lawmakers of the European Parliament. And European Union laws are with OMV as well: An EU Council decree ruled that certain US laws aiming to be effective in other countries as well (for example the Iran Sanctions Act) must not to be followed by companies in the EU.

What Washington can do, however, is put sanctions on OMV, such as banning OMV imports to the United States, or freezing loans and other financial dealings with US banks. All of this wouldn't hurt OMV, however, experts say. „OMV is virtually debt-free,” an Austrian journalist, who has covered OMV for years, told United Press International. „They have their markets in Europe and North Africa, and they finance themselves exclusively from European banks.” He also said Austria will likely not bow to US pressure because of another big project OMV (which is 30% government-owned) and Vienna are eyeing: The Nabucco Pipeline, a proposed pipeline project that will transport gas from Turkey to Austria, via Bulgaria, Romania, and Hungary.

The EU has argued the pipeline will make the continent less dependent on Russian gas imports. Once completed, it could be linked to several other pipelines in the region and would allow gas imports from producers in the Middle East and Caspian region such as Iran, Azerbaijan and Turkmenistan. The transport capacity of the pipeline, which is estimated to be finished by 2011 at a cost of nearly $6 billion, will reach a capacity of up to 30 billion cubic meters per year in the long term, around or after 2020.

„Because of the Nabucco pipeline, Austria isn't interested in creating a bad mood in Iran.” The journalist added, however, that OMV was to be faulted for „bad timing” when communicating the latest exploration deal with Iran, given the fact the international community is talking about imposing harsher sanctions on Tehran because of the country's controversial nuclear program. „If the whole deal would have been communicated at the end of the summer, after sanctions are put in place, there wouldn’t be all the fuss about it,” he said. (