European oil majors resisted pressure from the US to stop doing business with Iran, in spite of Washington's drive to isolate Tehran over a nuclear programme the West suspects is aimed at making bombs.

Total said it was still buying Iranian crude as it was not illegal under new UN sanctions, Statoil said it was providing Iran with technical assistance and ENI said it would exit Iran only when existing deals expire.

The US had said on Thursday that all three, as well as Royal Dutch Shell, would abandon their Iranian activities voluntarily to avoid US sanctions which can target foreign firms that do business with the Islamic state.

US Deputy Secretary of State James Steinberg said on Thursday the companies "have provided assurances to us" that they have stopped or are in process of stopping activity in Iran and would not undertake new deals that may be sanctionable.

Iran sits on the world's second largest natural gas reserves after Russia and one of its largest proven reserves of oil, but Western energy companies have halted or scaled down their operations in the country due to the escalating nuclear dispute.

Tougher sanctions on Iran in recent months have raised the stakes for international oil firms while "also increasing the sense that the worsening of Iran's operational environment is irreversible", the IHS Global Insight consultancy said.

The former head of the UN nuclear watchdog's inspections worldwide said Iran was making "slow but steady" progress on its nuclear programme and he believed there was still time to find a diplomatic solution to the standoff.

"They are making progress, but I think there is still time for a negotiated solution," Olli Heinonen, who quit in August and now teaches at Harvard University, told Reuters.

Nuclear curb

Major powers hope new UN, US and European sanctions, imposed on Iran since June, will persuade it to enter serious negotiations on curbing its nuclear development.

Iran has repeatedly ruled out stopping nuclear enrichment and dismissed the impact of punitive measures, while leaving the door open for talks which may resume soon.

State Department spokesman P J Crowley said on Friday he was unaware of any "pushback" from oil companies regarding ongoing business in Iran but was continuing to discuss the logistics of their pullout with them.

"We have a good understanding of what these companies are doing," Crowley said, adding that this covered both their decision to unwind business dealings with Iran and pledges not to launch any new business with the country.

"They are looking after their own ...business reputation, as we expected," Crowley said.

In a move partly intended to make it less vulnerable to sanctions, Iran plans to cut hefty food and fuel subsidies and a government official said in Tehran on Friday that gasoline prices will rise sharply in the coming weeks.

President Mahmoud Ahmadinejad wants to phase out $100 billion of subsidies, a policy economists say is a necessary but politically risky step.

In Tokyo, Trade Minister Akihiro Ohata said Japan's top oil explorer Inpex Corp may pull out of an oilfield project in Iran, a move that would see it join other global energy firms shunning the country.

A Total spokeswoman said the latest European sanctions "will keep to a minimum our activities" in Iran. But she said Total had not cut back its activities in the country since it said earlier this year it would halt the sale of refined products.

Statoil said it would conclude work in Iran by 2012 at the latest but was still providing technical assistance after finishing development of three phases of the South Pars natural gas project last year.

"Already in 2008 we said that we would not make further investments in Iran," spokesman Baard Glad Pedersen said.

Shell said it was complying with all legislation while declining to comment on its trading activities. Traders say it is still involved in Iranian crude purchases. "As you know, it is not illegal to lift oil from Iran," a Shell spokesman said. – Reuters