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President Clinton on Tuesday blocked Conoco's $1 billion oil development deal in the Persian Gulf on the grounds that it undermined U.S. efforts to isolate Iran's bellicose regime.

The president's decision to ban U.S. investment in Iran's oil and gas industry gave the DuPont subsidiary a way to withdraw from a deal that was criticized by the administration, a powerful senator and influential members of the DuPont board."Iran's oil and gas production provides Tehran with the economic wherewithal to finance terrorism and weapons programs," said Peter Tarnoff, U.S. undersecretary of state. "American companies should not be making it possible for Iran to develop its oil resources as long as the Iranian government engages in this behav-ior."

"The president's executive order has made the government's position very clear," said Constantine S. Nicandros, vice chairman of DuPont and president and chief executive of Houston-based Conoco. "DuPont and Conoco pride themselves on being good corporate citizens in the United States as well as around the world. As a result, Conoco will not proceed with the agreement."

But Clinton's executive order, which won't officially be issued for a few days, won't necessarily deprive Iran of foreign investment to develop the two oil fields in the Persian Gulf that are expected to yield 120,000 barrels of crude oil per day.

Conoco won the right to develop the fields in a competition with two French companies - Total and Elf Aquitaine. The French government does not restrict its companies' investments in Iran.

"There has not been a flood of direct foreign investment in the past," said Deputy Energy Secretary Bill White. "We don't obviously have any guarantees of what the future will hold."

The Conoco contract would have been the first oil development deal between a U.S. firm and the National Iranian Oil Co. since dozens of U.S. hostages were taken during the Iranian revolution of 1979.

White said the president's order will not impose new limits on the sale of oil-field equipment to Iran or stop U.S. companies from buying Iranian oil for refineries in Europe and Asia.

"This is a very targeted effort that would have minimum impact on U.S. jobs," White said.

Sen. Alfonse D'Amato, R-N.Y., said he was glad Conoco canceled its deal but still plans to press legislation to impose a ban on U.S. business dealings with Iran. He said he will go ahead with a Thursday hearing on the bill before the Senate Banking Committee, which he chairs.

D'Amato wants to block U.S. companies from buying Iranian oil even for overseas refineries. U.S. companies buy about 600,000 barrels of oil per day from Iran, about a fourth of the Persian Gulf nation's oil exports.

"If we are going to have a real ban, if we are going to fight terrorism, if we are going to take on the Iranians who export terrorism, then let's do it the right way," D'Amato said.

White House Press Secretary Mike McCurry said the Clinton administration has not taken a position on D'Amato's legislation, which has 23 co-sponsors in the Senate.

Administration officials said repeatedly Tuesday that Conoco should not have interpreted the government's failure to prohibit U.S. companies from buying Iranian oil as a signal that Washington would condone a major oil industry investment that would expand Iran's production.

A State Department spokeswoman said Conoco had discussed the contract with a senior department official during the negotiations with Iran. But while the official acknowledged that U.S. law did not prevent Conoco from entering into a contract with Iran, he also told the company the deal was contrary to U.S. policy.

"In no way was there a wink and a nod," the spokeswoman said.

"This policy should not have taken any U.S. company by surprise," White said. "Most of the major oil companies have been very aware of the administration's antipathy to large new investments in Iran."

Nicandros, Conoco president, said the DuPont board had told the company's management that it would not approve the Iran contract if the U.S. government opposed the deal.

Board member Edgar M. Bronfman is chairman of the World Jewish Congress and a strong supporter of a tough U.S. policy against Iran. Together with Edgar Bronfman Jr. and Charles R. Bronfman, the Bronfman family controls 25 percent of the votes on DuPont's board.

By last weekend, with the DuPont board unhappy with the deal announced March 6 and the company taking a political beating in Washington, the company may have been looking for a way out.

McCurry said Conoco "worked cooperatively" with the administration in formulating the executive order.

"The president appreciates the willingness of Conoco to work with us on this important issue," McCurry said.