IRAN - The Nuclear Issue & US Pressures.

Reuters on April 20 quoted an Iranian official as saying: "Our energy consumption is growing 7% every year. We need nuclear and renewables. Otherwise, we could become like Indonesia" - the only net oil importer in OPEC. But Iran's nuclear programme has compelled its Arab neighbours to opt for the atomic option, although they all insist this is only to be for civilian use.

Nuclear energy is enjoying a renaissance the world over as its green credentials and promise of secure supplies help to overcome worries about its safety. Reuters quoted Luis Echavarri, director general of the OECD's Nuclear Energy Agency, as saying: "Nuclear is a very attractive energy source. Nuclear has demonstrated it is able to produce massive amounts of electricity without emitting CO2". Reuters quoted Frank Barnaby of the Oxford Research Centre as saying: "They argue that they need oil and gas for foreign currency and they don't want to squander it, but nuclear inevitably produces plutonium that can be used in nuclear weapons. You have to suspect that a number of countries want nuclear weapons. If you take into account the nuclear cycle, mining uranium etc and decommissioning the waste, then it's not carbon-free".

The Bush administration faces a growing dilemma over the pressure it is placing on European companies to suspend investment in Iran, with some US lawmakers dissatisfied with the effort and European allies worried about its tactics. The US Treasury and State Department have sent officials across Europe, stepping up pressure on IOCs in particular not to go ahead with investment plans in Iran. They are seeking to turn the economic screws on Tehran over its nuclear programme, which has already attracted limited UNSC sanctions.

Bush administration officials testifying about Iran on April 18 at a congressional hearing were given a roasting by Democratic Chair of House Subcommittee on Terrorism and Non-Proliferation Brad Sherman. Sherman repeatedly cut short State Department official Paul Simons for refusing to answer "yes or no" to the question whether any IOC had invested more than $20m/year in Iran's petroleum industry and would thus be open to unilateral US sanctions. He ridiculed the administration for allowing imports of Iranian caviar and carpets, and letting the World Bank lend over $1 bn to Iran.

US officials had previously said they had spoken to the CEOs and senior financial officers of several big IOCs, including Shell, Repsol/YPF of Spain, and companies from China and Malaysia to encourage them to stop investments. EU Ambassador to Washington John Bruton on April 19 expressed concern that US Treasury officials touring Europe might be threatening EU firms with application of extra-territorial US legislation. The EU would "question the wisdom" of the US seeking to impose such sanctions, either retroactively or in the future.

An EU-US summit to be held in Washington on April 30 would include talks on Iran policy. US Under-Secretary for Terrorism and Financial Intelligence Stuart Levey on April 20 was quoted as saying "a number" of non-financial firms had indicated their intentions to postpone investment decisions while others had said they would not take any such decisions for some time, adding: "I think that's a good thing. They are obviously grappling with the issue of whether they want to invest in Iran under the circumstances and a lot of them are saying, 'well no, not under the circumstances'. Perhaps they are hoping that the circumstances will change". He declined to name the groups.

Levey noted strong interest in the US Congress to take action against firms investing in Iran. But he said the Bush administration believed such actions had "the tendency to drive wedges between the US and the third countries that we're trying to work with to put pressure on Iran. We're hoping to proceed in a different way".

In a move some analysts saw as a sign of investment hesitation, Tehran recently said it had extended by up to four months a deadline for Total of France to decide whether to invest in an integrated $10 bn South Pars gas E&P/LNG. The original deadline expired at end-March. Shell and Repsol signed an agreement in January with Iran over an integrated $5 bn gas E&P/LNG project constituting a later phase of the South Pars development. A final decision is not expected before the first quarter of 2008. A Shell spokesman said the IOC was a year or more away from any investment decision on the project and current work in Iran was to establish its "engineering and economic feasibility".