U.S. sees important signal in Russia move

By Carol Giacomo, Diplomatic Correspondent

WASHINGTON (Reuters) - Russia's recent decision to delay delivering fuel to an Iranian nuclear reactor is significant and shows Moscow will no longer do "business as usual" with Tehran because of proliferation concerns, Undersecretary of State Nicholas Burns said on Wednesday.

He cited the Russian position as evidence that a U.S. diplomatic effort to increase pressure on Iran was making progress, but some senators were skeptical and said they may take unilateral action.

Russia has disputed a New York Times report that Moscow halted the fuel delivery as an ultimatum to force Tehran to suspend uranium enrichment, as the U.N. Security Council has demanded.

While avoiding the word ultimatum, Burns said "Russia's actions over the last week have been very important ... It's our appreciation that the Russian government does not want to see Iran get nuclear weapons."

Under questioning by members of the Senate Banking Committee, Burns insisted "the Russians sent a very clear message ... It's not going to be business as usual."

Russian officials have said a dispute over payments is behind the delay in delivering fuel to the $1 billion reactor at Bushehr, which Russia built. But U.S. and European officials say Moscow does not want Iran to have nuclear weapons and has been persuaded that it should not receive the fuel.

Speaking from New York via video to a Washington-based conference, Iran's ambassador to the United Nations, Jarad Zarif, said the Bushehr experience has made his country more distrustful of any international deal on the nuclear question.

He said Iran is prepared to help bring stability to the Middle East and insisted a resolution to the nuclear row was within reach, but Tehran would not suspend enrichment.

The United States and leading Europeans say Iran is developing an atom bomb under the guise of a civilian nuclear program, a charge Tehran rejects. Uranium enrichment can be used for energy or for bomb making.

Russia has been instrumental in negotiating a U.N. resolution that would tighten sanctions against Iran, particularly a list of financial penalties on officials and institutions. It could be voted this week.

But Senate Banking Committee chairman Christopher Dodd, a Democratic presidential contender, said the resolution is too weak and he may propose new legislation to sanction oil and gas companies that strike deals with Iran if the resolution is not strengthened.

A committee of the U.S. House of Representatives is considering similar legislation.

With congressional attitudes hardening, the Bush administration has begun telling foreign oil and gas companies they could face U.S. sanctions for investing in Iran. In recent weeks "we have begun jawboning" Shell and other companies and warning them the deals are a "bad idea" that could put them at risk of U.S. sanctions if consummated, Burns said.

But Dodd and other senators criticized the administration for failing to implement the 1995 Iran Sanctions Act, which requires Washington to slap sanctions on foreign firms investing more than $20 million a year in Iran's energy sector.

Penalties have never been imposed despite billions of dollars in new deals with Iran because the administration says this will alienate U.S. allies central to diplomatic efforts to pressure Iran into halting uranium enrichment.

Shell said recently it had signed a deal with Iran in conjunction with Spain's Repsol to develop South Pars, the OPEC member's biggest natural gas field, despite U.S. pressure not to invest in Iran. China's National Offshore Oil Corporation, Australian LNG Co., and Malaysia's SKS are also in negotiations.