Iran admits nuke spat hurts oil - report

NEW YORK (CNNMoney.com) -- Iran, the world's fourth largest oil producer, admitted Thursday its nuclear spat with the West is beginning to hurt investment in its oil industry, according to a newspaper report Thursday.

"Currently, overseas banks and financiers have decreased their co-operation," Kazem Vaziri-Hamaneh, Iran's oil minister, told the ministry's news agency, according to the Financial Times.

The admission was a rare one for Iran, which has remained defiant over its nuclear program but has struggled with slipping oil production ever since its wells were badly damaged during the 1980s war with Iraq.

The statement from the oil minister was taken as a sign that even the limited pressure being applied on the country is beginning to have an effect, the Times said.

"There is a growing awareness that de facto sanctions are beginning to hurt, and everyone understands the future of the economy depends on the development of oil and gas," a western diplomat told the Times. "Banks are not lending, partly because of U.S. pressure, but the banks are also drawing their own conclusions."

While there have been no official sanctions imposed on Iran as a result of its nuclear program yet, the United States has put pressure on banks and businesses worldwide to not do business with the country.

Strict sanctions against Iran are unlikely to pass the United Nations Security Council anytime soon, as veto-wielding members China and Russia are not keen on the idea.

But the mere threat of them is seen as keeping some foreign investors at bay, the Times said.

Yet Iran has not been totally choked off.

China's CNOOC oil company agreed Wednesday to a tentative $16 billion deal to develop a huge natural gas reserve in the country, the Times reported.

The U.S., along with several European nations, contends Iran is running a nuclear program with the intentions of building a bomb, which is a violation of treaties it has signed.

Iran says its nuclear program is intended only for peaceful purposes and is therefore allowed.

The U.S. has imposed sanctions on Iran since its embassy was seized in late 1979 by supports of a religious-based government, which overthrew a U.S.-backed dictatorship earlier that year.

Oil stocks were off in early Thursday trading. BP (Charts) was down 0.7 percent, Chevron (Charts) and Exxon Mobil Corp. (Charts) fell 0.5 percent, Conoco-Phillips (Charts) dropped 1.0 percent and Royal Dutch Shell (Charts) was down 0.4 percent.

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