Essar backs off Iranian refinery - Minnesota governor

By Matt Daily

NEW YORK (Reuters) - Essar Group has backed away from development of a new oil refinery in Iran that would violate U.S. sanctions on Tehran, Minnesota Governor Tim Pawlenty said on Wednesday.

Essar, which recently bought a Minnesota steel company, had considered working with Iran to build the refinery and bidding on exploration blocks, Essar Group Americas President Madhu Vuppuluri told Pawlenty in a letter dated Oct. 31. But he said Essar Group would abide by laws limiting operations in Iran.

The move came after Pawlenty flew to India to discuss Essar's Iran work and potential conflicts with U.S. law.

Pawlenty said Essar Group's unit Essar Global would proceed with development of a planned steel plant in Minnesota.

The governor told a news conference that he and U.S. State Department officials who met with Essar "wanted to make sure that they were fully aware of the requirements of the Iran Country Sanctions Act, and that they understood that it would have consequences in the United States, including for the Minnesota project, if they were to go forward."

Last week, Washington tightened its long-standing sanctions on Iran in a fresh bid to persuade the country to halt its uranium enrichment activities that could be used to develop a nuclear weapons program.

The U.S. State Department declined to comment specifically on Essar, but a department official, speaking on condition of anonymity, said, "If this Indian company has decided it's in its best interest to back away from dealings in Iran, that's excellent."

U.S. companies are prohibited by law from working in Iran, although foreign affiliates of U.S. companies, including one linked to oil services company Halliburton, have conducted business there.