China, Russia, India and Turkey move ahead with trade and investment deals, slipping into the void left by U.S. and EU sanctions that aim to halt Iran’s nuclear program.

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August 8, 2010

Russia and China say they were surprised and disappointed that the Americans and Europeans, after pressing them to support U.N. sanctions on Iran for months, then adopted tougher sets of unilateral sanctions.

In recent days, senior officials of both countries have rejected calls from Washington to back off their business with Iran.

Chinese Vice Premier Li Keqiang told the visiting Iranian oil minister on Friday that China remained firmly committed to joint projects, calling Iran “an important trade partner.”

Obama signed the sanctions bill July 1, but the move did not derail a number of deals between Asian nations and Iran.

Days later, Chinese energy firms China International United Petroleum & Chemicals Co., also known as Unipec, and International Co., or Chinaoil, sold four tanker cargoes of gasoline to Iran, while four others were sold by the Turkish refiner Tupras, said an oil industry official who asked to remain unidentified because he was speaking about an unannounced deal.

China and Iran also have continued talks over the last month regarding oil and gas field development, petrochemicals, refineries and pipeline projects, which have raised China’s total investment to $40 billion, Iran’s deputy oil minister, Hossein Noghrekar Shirazi, said last month. He said China has proposed to build seven new refineries in Iran.

Also in July, India opened new talks with Iran over a $7.4-billion pipeline that would deliver natural gas to India and . A Turkish company, Som Petrol, signed a $1.3-billion deal to build a 410-mile section of pipeline carrying natural gas from Iran to Europe.

Russian and Iranian energy officials, after a meeting in Moscow, issued a statement saying they were “developing and widening” their joint efforts in the oil, gas and petrochemical sector.

The Russian Foreign Ministry has warned the United States against trying to punish Russian firms for expanding business in Iran.

Energy industry experts say China and other countries may continue signing deals with Iran, but before sinking money into the projects they will probably wait to see how strongly the United States and Europe will enforce the sanctions.

But it remains unclear how tough the Obama administration will be in punishing foreign companies, since doing so risks enraging major powers and complicating relations.

In 1998, for example, the Clinton administration considered sanctions against Total, Russia’s Gazprom and Petronas under an earlier law punishing foreign companies that invested in Iran. But to the dismay of some in Congress, waived the punishments after loud protests from the three governments.

This month, the Obama administration may reveal whether it is willing to give the new sanctions teeth. The administration is considering sanctions against 10 foreign companies and may announce its decision in the next few days. It has not disclosed where the companies are based.

Mark Dubowitz, a supporter of sanctions at the Foundation for Defense of Democracies, said large fines or other strong action “would send a ripple of fear through the entire energy industry.”

If the response is mild “it would send a message of business as usual, and all the companies that have left would come back in,” he said.

Some members of Congress remain nervous that the administration, during a period of tense relations with China, Russia and Turkey, might be tempted to set aside the punishments. At the House hearing on July 29, members of Congress complained repeatedly about past administrations’ habit of waiving punishments for companies doing business in Iran, and urged the administration not to let China and Russia off the hook.

But Edward Chow, a former energy industry executive at the Center for Strategic and International Studies, noted that the countries the might enrage if it hands out stiff punishments are also ones whose cooperation the United States needs in its efforts to persuade Iran to give up its nuclear ambitions.

“This has kind of painted the president into a corner,” he said.