Iran's National Petrochemical Company was favoured to buy Basell, the world's top producer of the plastic polypropylene, from oil giant Royal Dutch/Shell and Germany's BASF, in a deal worth 4.4 billion euros ($5.7 billion).
"Although NPC won all aspects of the Basell tender, due to US pressures we are unofficially told Iran cannot buy Basell," semi-official Iranian news agency ISNA quoted NPC Managing Director Mohammad Reza Nematzadeh as saying on Wednesday.
Reuters reported on Sunday that an acquisition by Iran was becoming less likely because of US opposition. Rejection of the bid leaves a group of investors led by Purnendu Chatterjee and India's Haldia Petrochemicals as the only alternative buyer.
"There's a decent chance of a deal (with Haldia) happening overnight," said one source familiar with the situation. Another source said a sale could be agreed by the end of the week.
NPC's inability to clinch a deal with BASF and Shell is the latest evidence of a deep reluctance among European companies to do business with Iran in the face of US pressure.
A source familiar with the negotiations told Reuters earlier this week that intense US lobbying was making it difficult for the sellers to win boardroom backing for the Basell transaction.
Determined to prevent Iran from building nuclear weapons, the US has threatened to brand as "proliferators" companies large and small that supply any goods which could be used for civilian or military purposes.
Iranian officials have been all too
often frustrated by US sanctions
This is making it harder, however, for Europe to offer Iran economic incentives to persuade it to abandon nuclear processes that could be used to build weapons.
German engineering conglomerate Siemens, French State-controlled nuclear-power equipment company Areva and British oil major BP, have decided to stay out of Iran for now, industry sources and diplomats have said.
Netherlands-based Basell has operations around the world, selling products to a wide range of industries in 120 countries.
Haldia is a smaller rival and was jointly founded by the government of West Bengal, Chatterjee's investment vehicle and India's salt-to-software Tata conglomerate.
"I will not be able to comment on this at all," Swapan Bhowmik, chief executive of Haldia Petrochemicals, said.
"Although NPC won all aspects of the Basell tender, due to US pressures we are unofficially told Iran cannot buy Basell"
Mohammad Reza Nematzadeh,
National Petrochemical Company
As recently as Saturday, the Iranians were saying they expected to win the battle to buy Basell, the world's top producer of polypropylene, which is used in a range of applications from car dashboards to packaging.
Iran vowed on Tuesday to press ahead with nuclear activities that could be used to make weapons and accused the US and Israel of threatening international peace with their own atomic arsenals.
ISNA quoted Nematzadeh on Wednesday as saying the US had scuttled the purchase of Basell.
"We have always been harmed by our enemies and this time too the United States tackled the purchase of Basell," he said.
A State Department official told Reuters over the weekend that the department had expressed its concerns to BASF and Shell, which each own 50% of Basell.
He said the US was concerned about potential misuse of Basell technology and the fact that, under the US sanctions regime, US companies would not be able to deal with Basell if Iran took it over.
Iran's petroleum industry is flush
with cash thanks to record prices
A BASF spokesman said: "We are in negotiations over the sale of Basell. We hope a deal will be completed within the first half of this year."
"We don't comment on details of the negotiations."
A spokeswoman for Shell said only that offers for Basell had been received and that advanced discussions were under way.
In Frankfurt, BASF shares closed up 0.4% at 51.66 euros, while in London, Shell stock ended up 0.3% at 472-1/2 pence.