Two oil companies, Elf Aquitane of France and Bow Valley of Canada, have signed a contract with Iran to exploit another big oil deposit in the Gulf.

The deal has been completed in defiance of American legislation which threatens sanctions against international companies investing in countries like Iran, which are perceived by the White House as supporters of terrorism.

The deal signed in Teheran to exploit the offshore site of Balal follows close businesslike co-operation between Iran, France and Canada.

It is worth $300m and forsees an operation lasting up to six years. All three partners have shown a complete disregard for the Sanctions Act, introduced to try to scare off potential investors in Iran's rich oil and gas fields.

'US can bid for future projects'

A French Foreign Ministry spokesman said simply that France did not recognise any global reach of American legislation; the Canadian company said it had the full support of the Canadian Government, while the latest word from Iran - perhaps a lttle mischeviously - was that American companies were free to bid for future projects.

This latest victory in Iran's campaign to show up the impotence of the American legislation follows a similar deal with Elf and the Italian company Agip last month.

All the Americans could do on that occasion was to express concern and disappointment - cold comfort for their increasingly frustrated oil companies watching lucrative contracts pass them by.