Clinton ban on $1bn oil deal stuns Iranians

President Bill Clinton's decision to ban a controversial $1bn (£645m) oil deal between the US firm Continental Oil (Conoco) and the National Iranian Oil Company has "stunned" Iranian clerical leaders, sources in Tehran said.

Iran described the ban as "open deception". Its deputy foreign minister, Mahmoud Vaezi, said: "It will be the American company which will suffer financially, not Iran."

The deal, signed 10 days ago by Conoco Iran NV, a hastily created Dutch subsidiary of the Houston-based oil giant, had already stirred controversy in Iran. In the city of Qom, theology students had demonstrated against the Iranian oil minister, Gholamreza Aghazadeh.

Many Iranians were surprised that the contract was granted to an American company which is partly controlled by members of the US pro-Israel lobby. Almost 25 per cent of Du Pont de Nemours, which controls Conoco, is owned by the Bronfman family. Edgar Bronfman is chairman of the World Jewish Congress.

In a fatwa (religious order) Ayatollah Khamenei, Iran's spiritual leader, had banned all deals with any firm connected to "Zionism". That is probably why the Iranians had presented Conoco as a Dutch firm.

"This [ban] will further complicate the situation of Iran in the world," Parviz Mina, an Iranian oil consultant based in Paris, predicted. But according to Mehdi Varzi, a London-based Iranian oil expert, the ban will not prevent European companies doing business with Iran. Two French companies, Total and ELF, were in competition with Conoco for the contract. Mr Varzi believes that the Iranians will now go back to the Europeans, particularly the French.

Mike McCurry, the White House press secretary, said the order was issued in response to "actions and policies of Iran, which includes support for international terrorism and efforts at undermining the Middle East peace process".

t The Clinton administration is considering ways to keep an advanced reactor under development in Iran from being used to produce nuclear weapons. The administration is opposed to the $800m (£520m) deal, for which Russia is providing technology.