U.S. Senate panel approves new Iran sanctions

WASHINGTON, July 17 (Reuters) - The U.S. Senate Banking Committee overwhelmingly approved a bill on Thursday that would expand trade and economic sanctions in another attempt to prod Iran to step back from suspected nuclear weapons production and alleged support for terrorist activities.

By a vote of 19-2, the committee sent to the full Senate legislation that would try to clamp down on countries suspected of helping transport sensitive technologies and goods to Iran in violation of existing U.S. rules.

The measure also encourages U.S. pension plan managers and state and local governments to divest, directly or indirectly, from Iran's energy sector.

Patterned after a new U.S. law aimed at Sudan, the legislation allows state and local governments to divest from any company that invests $20 million or more in Iranian energy or extends $20 million or more in credit to be used for investing there.

Under the bill, the Bush administration also would be encouraged to designate the central bank of Iran as a supporter of terrorism, triggering sanctions.

The United States and some other countries accuse Iran of seeking nuclear weapons under cover of an energy program. Washington also says Tehran supports Shi'ite militias hostile to U.S. forces in Iraq and Islamist militants elsewhere.

Iran denies those charges.


Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said the bill could be coupled with other Iran sanctions measures also moving through the Senate.

"There is considerable interest among senators, including our leadership, in moving comprehensive Iran legislation quickly," Dodd said. Similar bills are moving through the House of Representatives.

Sen. Chuck Hagel, a Nebraska Republican who voted against the bill, said it "does not sanction Iran. It directly sanctions (U.S.) allies, friends and others."

Hagel also noted some progress was being seen on Iran, such as nuclear talks this weekend in Geneva between Iran, Britain, France, Germany, Russia and China. A U.S. envoy will attend, a major shift in U.S. policy.

There also have been reports that the United States may establish a diplomatic interests section in Tehran, with which it cut diplomatic ties after the Islamic Revolution of 1979, when the U.S. embassy was seized and hostages taken.

Sen. Charles Schumer, a New York Democrat, said he might pursue an amendment on the Senate floor encouraging Russia to join in U.S. boycott efforts against Iran. In return, Schumer said, the U.S. would back off plans to build a defensive missile system in eastern Europe that displeases Moscow.

The legislation was approved by the banking panel after Iran test-fired missiles last week that could be used to strike Israel. On Tuesday, the Pentagon said Iran also has the ability to launch a ballistic missile capable of hitting some of eastern and southern Europe.

The missile tests, nuclear dispute and hostile rhetoric have fed perceptions, especially in the global financial markets, of a rising possibility of confrontation between Iran and the United States or Israel, that had helped drive oil prices to record highs.

Editing by Patricia Zengerle