Russia says US bans its arms firms over Iran sales

MOSCOW, Aug 4 (Reuters) Washington imposed sanctions on two of Russia's leading arms firms over their links with Iran today, a step Moscow said was a ''clearly illegitimate'' attempt to impose US laws on foreigners.

Russia's Foreign Ministry said in a statement that the US State Department had slapped sanctions on state export agency Rosoboronexport and state-owned warplane maker Sukhoi, meaning they could no longer work with US firms.

''This is a clearly illegitimate attempt to make foreign companies work by internal American rules,'' the statement said.

Russia said the sanctions had been imposed under a US law which penalises companies for working with Iran in the sphere of weapons of mass destruction.

The US later said it had imposed sanctions on seven companies from North Korea, Russia, India and Cuba for their arms deals with Iran.

Iran and Russia signed a 1 billion dollar defence deal in December, Russian media said at the time. Russia agreed to supply TOR-M1 ground-to-air missile systems to the Islamic Republic and also agreed to modernise its air force.

Russia is also building an atomic power station at Bushehr on Iran's Gulf coast.

The statement said the sanctions would stop US companies from working with the two Russian firms, a potential blow to the Russian Regional Jet civil aviation project, which Sukhoi is working on with aerospace giant Boeing.

A Sukhoi official said it had broken no regulations.

''We have competed on the US market for a long time, we carefully study the laws and have never violated anything and do not intend to,'' Alexander Klementev, deputy director of Sukhoi told Ekho Moskvy radio.

''Sukhoi has sent absolutely nothing to Iran in the last 6 or 7 years.'' Rosoboronexport is one of the world's biggest arms sellers, accounting for around 70 per cent of Russia's 6 billion dollars of sales in 2005.

TITANIUM? It was not clear from the Russian statement whether the sanctions would also cover the two firms' subsidiaries. If so, they could soon affect US imports of titanium, an important metal in the aerospace sector.

Rosoboronexport is planning to acquire the world's biggest titanium maker, Russia's VSMPO-Avisma, which supplies 35-40 per cent of Boeing's titanium as well as 60-70 percent of that used by its European rival Airbus.

Aircraft part maker Goodrich Corp. is also a customer.

Rosoboronexport owns Russian carmaker AvtoVAZ, which has a troubled joint venture with US auto giant General Motors, which could also be affected.

''The US is punishing its own companies, taking away their possibilities to cooperate with leading Russian companies,'' the ministry said.

Washington and Moscow have clashed frequently over trade policy and Iran over the past few years, with US officials angering President Vladimir Putin with criticism of his democratic record and foreign and energy policy.

Washington says Iran is using its civilian nuclear programme as cover to develop atomic weapons.

REUTERS SHB RN2326