US pressing ahead with Malaysia trade talks-Schwab

WASHINGTON, Feb 3 (Reuters) The United States is continuing free trade talks with Malaysia, despite concerns raised by a senior US lawmaker over its energy deal with Iran, US Trade Representative Susan Schwab said.

''We are pressing ahead,'' Schwab told reporters yesterday.

The two countries need to finish the proposed free trade agreement by the end of March because of key U.S. legislation that expires at mid-year, she said.

House of Representatives Foreign Affairs Committee Chairman Tom Lantos, a California Democrat, urged Schwab in a letter on Wednesday to suspend talks on the pact because of a billion energy development deal signed last month between Malaysia's SKS and state-owned National Iranian Oil Company.

''This is a disturbing development that I believe requires swift action by the administration,'' Lantos said.

The liquefied natural gas development deal potentially requires the United States to penalize SKS under the recently expanded Iran Sanctions Act, which calls for steps against companies involved in Iranian energy development.

''In addition to enforcing this legislation, it behooves all of us charged with implementing U.S. foreign policy to take actions to further press Iran to cease its development of nuclear weapons,'' Lantos said.

Schwab, who has just return from Europe, said she would review Lantos' concerns. But with a fifth round of talks scheduled next week in Malaysia, ''we will press ahead in the hopes of getting a free trade agreement that is in the interest of both countries,'' Schwab said.

Lantos' letter triggered a stiff response from Malaysian officials, who said they would not bow to pressure from Washington to force SKS to cancel the deal.

''We reject the pressure being inflicted upon us. We are a sovereign country and have our own stand,'' state news agency Bernama quoted Prime Minister Abdullah Ahmad Badawi as telling reporters.

Malaysia's Trade Ministry said in a statement it was prepared to continue with the talks, but wanted the Bush administration to make its stand known so that the Southeast Asian country could decide on the future of negotiations.

''Malaysia reiterates that the negotiations cannot be held hostage to any political demand, and cannot be conducted under such threats,'' the ministry said. ''Malaysia is also ready to suspend negotiations if the situation warrants it.'' Reuters SBA VP0622