US allies alarmed at trade ban on Iran

Clinton decision to announce embargo to Jewish audience seen as 'insulting' and 'fatuous'

President Bill Clinton's decision to cut off trade and investment to Iran drew a predictable blast of rhetorical defiance from Tehran yesterday but created a mixture of confusion and doubt among America's allies.

In London, officials said Britain was unlikely to join the ban, regarding any trade embargo as an instrument of last resort. Britain prefers to keep up the "critical dialogue" with Iran agreed by the European Union. A similar attitude was voiced in Paris, Bonn and Rome.

The Clinton embargo marks a sharp escalation in a long US campaign to isolate and undermine the Muslim revolutionary regime in Tehran. Stating that Iran was an international menace because of its support for terrorism and its efforts to build a nuclear weapon, Mr Clinton on Sunday said nations "had to make sacrifices in order to change Iran's behaviour".

The US Secretary of State, Warren Christopher, said yesterday that the US would step up pressure on other countries to join a trade embargo on Iran, declaring it to be a test of US leadership in the world.

Mr Christopher vowed to keep pressing Russia and China not to sell Iran nuclear technology, and said Washington also wanted its allies to support the US ban on commerce with what it considers a terrorist nation. The embargo is the most significant US move to damage the Iranian economy since President Ronald Reagan banned Iranian imports in 1987.

The American decision was intended both to deepen Iran's economic crisis - which has led to riots near Tehran - and to serve as an example to countries, such as Russia, unwilling to deprive themselves of commercial advantage by renouncing questionable deals with Iran.

The embargo's main effect is to halt trade by US oil companies, which bought more than $4bn (£2.4bn) worth of Iranian oil last year. Crude oil prices rose on the news, but market analysts believe the ban could actually push prices down, as Iran discounts to win new customers.

A critical factor in the US calculation was the refusal by Russia to cancel the sale of four nuclear reactors to Iran, despite direct pleas by Mr Christopher to the Russian Foreign Minister, Andrei Kozyrev, and despite the sharing of secret intelligence on Iran's clandestine weapons programme.

But Mr Clinton's crusade against Iran is not likely to be endorsed uncritically by US allies in the west or friends in the Arab world. His decision to announce the ban in a speech to the World Jewish Congress was described by an Arab diplomat as "an insult" and by one senior European official as "fatuous".

President Ali Akbar Hashemi Rafsanjani of Iran has publicly linked Israel and the United States as partners in a campaign to isolate his country. "They are trying to dishearten the people, to create a feeling of hopelessness in a society about the future, to threaten the people about the future and to launch a psychological war," he said.

The US is now certain to launch a diplomatic effort to rally support against Iran in the weeks before the summit of the Group of Seven industrialised nations in Canada next month. The White House said yesterday that unnamed G7 nations were "reviewing their economic relations with Iran" at the request of the United States.

But the only immediate reaction to confirm that suggestion came from Japan, where officials conceded that plans to extend 40 billion yen in official loans to Iran were under review. Britain is believed to be dubious about any moves that might push Iran to the brink of desperation and sceptical about the outcome of any sudden change to the Islamic ruling system in Tehran.

But Mr Clinton's claims about Iranian troublemaking abroad were reinforced yesterday when Saudi Arabian security forces moved in to stop pilgrims from Iran staging political demonstrations at the haj, or annual pilgrimage, to Mecca.

Iran said that 2,000 Saudi security forces had taken up position near the pilgrims' camp, and that they had torn down a sign bearing verses from the Koran. On Sunday the Saudi Interior Minister, Nayef ibn Abdelaziz, warned that "we will be firm and will not allow any threat to the pilgrimage and the security of the holy sites".