US Senate votes to penalize Iran gasoline suppliers

WASHINGTON, July 30 Thu Jul 30, 2009 4:34pm EDT

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WASHINGTON, July 30 (Reuters) - To pressure Tehran to give up its nuclear program, the U.S. Senate has voted to ban companies that sell gasoline and other refined oil products to Iran from also receiving Energy Department contracts to deliver crude to the U.S. Strategic Petroleum Reserve.

Iran holds some of the world's biggest oil reserves, but it imports 40 percent of its gasoline to meet growing demand. U.S. lawmakers hope that by cutting off the country's motor fuel, Tehran will abandon its nuclear program, which they fear could be used to make weapons.

Iran says its nuclear program would be used for peaceful purposes to generate electricity.

The Senate included language to go after Iran's gasoline suppliers in an $34 billion energy and water spending bill that the chamber approved late on Wednesday. The measure must now be reconciled with a similar bill passed by the House of Representatives.

"Congress has embraced the idea of using Iran's economic Achilles' Heel -- its heavy dependence on gasoline imports ... to pressure the regime into giving up its illegal nuclear weapons program," said Mark Dubowitz, Executive Director for the Foundation for Defense of Democracies.

The U.S. emergency petroleum reserve was created by Congress in the mid 1970s after the Arab oil embargo. The stockpile is near capacity, holding some 724 million barrels of crude at four underground storage sites in Texas and Louisiana.

However, the Energy Department previously has awarded contracts to supply crude to the U.S. reserve to three of Iran's gasoline suppliers: Vitol [VITOLV.UL], Royal Dutch Shell Plc (RDSa.L) and Glencore.

Such companies would be barred from making similar oil deliveries in the future, if Iran does not agree to negotiate the end to its nuclear program by the time of the G-20 Summit that will be held in September. (Editing by Walter Bagley)

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