U.S. deal with European oil firms hobbles Iran Air

By Thomas Erdbrink
Washington Post Staff Writer
Saturday, October 16, 2010; 9:38 PM

TEHRAN - A recent agreement between four of Europe's largest oil companies and the United States aimed at further isolating Iran is already having an impact, with Iran Air, the Islamic republic's national carrier, unable to refuel its planes in most of Europe.

The fueling problem follows a new push by the Obama administration to move beyond the strict letter of sanctions it imposed to a broader attempt to discourage international businesses from dealing with Iran.

It also illustrates a shift away from an earlier U.S. policy of reaching out to the Iranian people and trying to target mostly state organizations central to Iran's nuclear program. Officials now admit that the increased pressure is hurting ordinary Iranians but say they should blame their leaders for the Islamic republic's increasing isolation.

Under the agreeement, announced in Washington on Sept. 30, Total of France, Statoil of Norway, Eni of Italy, and Royal Dutch Shell of Britain and the Netherlands pledged to end their investments in Iran and avoid new activity in the country's energy sector. In turn, U.S. officials said, the companies would be protected from possible U.S. penalties for doing business with Iran.

In recent weeks, several major oil firms, including British Petroleum, Royal Dutch Shell and Q8, have abruptly canceled jet fuel delivery contracts with Iran Air. The move by some big oil companies that were not part of the September agreement appears to indicate a ripple effect across the industry, as administration officials had hoped.

"The goal here is . . . to end companies from doing business within Iran," Deputy Secretary of State James B. Steinberg said when he announced the deal. He added that he hoped others would "see that this is what responsible companies are doing and that they should follow in those footsteps."

As a result of the canceled jet fuel contracts, all Iran Air planes departing from destinations such as Amsterdam, London and Stockholm are now forced to make lengthy fuel stops either at an airport in Germany or one in Austria, where Total of France and OMV of Austria are still providing the 66-year-old airline with jet fuel until their contracts run out, possibly as soon as next month. At that point, Iran Air could be forced to cancel or severely reduce flights.

During such a stop in the Austrian capital last Sunday, several passengers complained about the unannounced stop. "What do we have to do with our government?" an Iranian man asked loudly, after discovering to his surprise that the plane had landed on the Vienna tarmac. "We are becoming prisoners because of these disagreements between Iran and America.''

Iran Air's refueling problems come as the U.S. attempts to pressure the Islamic republic to abandon its nuclear program by targeting those who do business with Iran in the fields of finance, insurance, and transportation.

Earlier moves to isolate Iran focused on Iranian state organizations suspected of producing a nuclear weapon such as the Revolutionary Guard Corps or the Iranian Atomic Energy Organization. But the latest sanctions, which included restrictions on the sale of refined oil products to Iran, as well as the growing pressure on businesses to steer clear of Iran, are now affecting the private sector and ordinary civilians. For example, it is becoming increasingly difficult to import items from luxury cars to raw materials.

Last week, Japan's top oil explorer, Inpex Corp., said it had pulled out of Iran's Azadegan oil field project, citing concerns that the U.S. sanctions could make it more difficult for the company to raise money from U.S. banks.

Iran Air, a state airline, is the main lifeline for Iranians with the outside world. Nearly 500,000 passengers a year fly between Tehran and 11 European capitals and beyond, a top Iran Air official said.

"We will continue to fly to Europe, if needed even with half occupancy to save fuel which we can bring from Tehran," said Mohammad Jalali, an Amsterdam-based district manager for Iran Air. "But we are losing time, money and passengers," he said.

President Obama told Persian-language BBC Farsi channel in September that he was "concerned" for the Iranian people, but that they have to blame their leaders for the increasing isolation their country faces.

State Department spokesman P.J. Crowley said Friday that the administration was "directing our efforts at entities that we think support the government and its policies," but acknowledged that "there are ripple effects and that there are impacts that go beyond that."

"We want to see the Iranian people have the same opportunities to travel, to engage, as others in the region and around the world have," Crowley said. "And the only thing that's impeding Iran from having that kind of relationship with the United States and the rest of the world is the government and policies of Iran."

Under sanctions passed by Congress in July, jet fuel sales of as much as $5 million a year are permitted. Sanctions by the European Union specifically single out the civilian operations of Iran Air as being allowed, and do not call for restrictions against the airline. Jalali of Iran Air Amsterdam - an average station for the airline in Europe - said it purchased far below the $5 million limit.

After its delivery contract with Q8 was suddenly terminated by the Kuwaiti company, Iran Air approached all other possible sellers without success. "None of the oil companies are telling us why they have broken their contracts. We have agreements to operate from European countries; we are entitled to our fuel," Jalali said in an interview last week.

Representatives for major oil firms say jet fuel sales to Iran Air are good business but too dangerous to pursue given the threat of sanctions by the United States. "All big oil companies are in daily contact with the U.S. State Department regarding Iran," said a representative of a major oil firm on the condition of anonymity because of the sensitivity of the subject. "Be sure that the Obama administration is fully aware of the situation Iran Air is in."

Austrian oil company OMV, which is still delivering jet fuel to Iran Air planes in Vienna, said its contract with Iran Air is "in line with all regulations by the E.U. and the United Nations." A person authorized to speak for the company said that commitments would be honored "for the time being." A representative of Total of France, which is supplying Iran Air in Cologne, Germany, said it was not able to respond to questions currently. Total is one of the companies that agreed with the United States to end all investments in Iran.

Iran Air is planning to take its case to the international court of justice in The Hague. "Traveling is a human right, airline conventions are broken and neither the European Union, U.S. or United Nations sanctions are calling for these restrictions against us," Jalali said. "This is a low-level war between Iran and the U.S., but I don't want our passengers to be in the middle."

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