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Business

U.S. Sets Sights on German Energy Giant

The United States is mulling sanctions against the third-largest energy enterprise in Europe, RWE of Germany, for an oil and gas exploration contract the company has with Libya.

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RWE's €56 million contract with Libya could be in violation of U.S. law

A German energy company's oil and gas exploration contracts with Libya have raised hackles in Washington, which placed sanctions on the North African country in 1996.

A State Department spokesman told reporters Wednesday that exploration contracts between the mineral oil company RWE Dea, the daughter company of Germany's RWE energy concern, and the Libyan government are a "concern to us."

"We normally raise our concerns with appropriate parties … and we have done so in this case with the company and with the German government," Phillip Reeker said at a press conference on Wednesday.

Washington views the contract as a direct violation of its Iran-Libya Sanctions Act of 1996. That piece of legislation forbids foreign companies to invest more than $20 million a year in the petroleum resources of the two countries.

The sanctions are part of a U.S. strategy to force Libya and Iran to contain terrorism and move towards democracy by punishing them economically. The State Department considers Libya a rogue state that fosters terrorism and anti-American sentiment within the population.

RWE Dea, for its part, sees no violation. The investment in Libya is €56 million ($63 million) over a period of five years. That breaks down to less per year than the limit allowed by U.S. law.

"We conformed to all the necessary national and international legal guidelines," a spokesperson told wire reporters.

Protecting RWE interests in America

At the same time, observers say RWE may not want to rock the boat in Washington. In 2000, the Essen-based concern took over Thames Water, the world's third-largest water company, which last year bought the largest U.S. water company, American Water Works.

In the coming days, the State Department plans to evaluate the contract and then, "decide in light of our national interests, what action under the law we would take," said Reeker.

This is not the first time a German company has come under the U.S. sanction microscope. In May, ThyssenKrupp bought back 16.9 percent of its own shares from IFIC Holding, which is owned by the Islamic Republic of Iran. The buyback deal, which comes with a price tag of €406 million, was aimed at averting what ThyssenKrupp described as "serious imminent harm to the company" from threatened U.S. sanctions.