August 8, 2006

Kremlin warns US arms sanctions could hurt ties

MOSCOW (Reuters) - The Kremlin on Tuesday branded U.S.
sanctions against two leading Russian arms exporters "an
unfriendly act" and warned they could rebound on U.S.-Russia

The United States announced sanctions on Friday on seven
firms from Russia, India, North Korea and Cuba for selling
restricted items to Iran, which Washington fears is trying to
make nuclear weapons.

The sanctions were imposed on Russian state export agency
Rosoboronexport -- headed by a close friend of President
Vladimir Putin -- and state-owned warplane maker Sukhoi.

"This looks like unfair competition. It was an unfriendly
act toward Russia and it was not done in a spirit of
cooperation," Kremlin spokesman Dmitry Peskov said.

"If we are to speak about possible consequences of this act
for bilateral relations, of course it has not contributed to a
further strengthening of the partnership. Among other things we
can not rule out further negative consequences for this
relationship," he said.

The State Department said it imposed the sanctions after
Washington received information the companies had transferred
materials to Iran that could contribute to the development of
weapons of mass destruction or missiles.

The sanctions took effect on July 28 and will be in place
at least until July 28, 2008.

Last year Russia signed a contract to sell Tehran TOR-M1
ground-to-air missile systems and to modernize Iran's Russian
fighters, bombers and military helicopters.

Russian media said the sanctions were triggered by
Rosoboronexport's announcement last month of $3 billion in arms
deals with Venezuela, tied up in a visit to Russia last week by
President Hugo Chavez.

Rosoboronexport has sought to play down the impact of the
U.S. sanctions.

But they mark a new low in already chilly ties between
Moscow and Washington and some analysts say they could hurt the
chances of U.S. companies bidding for business in Russia.

ConocoPhillips and Chevron are among firms bidding for a
role in the $20 billion Shtokman project to develop Arctic gas
deposits. Boeing is pitching for a planned $3 billion aircraft
order by flag carrier Aeroflot.