Royal Dutch Shell has apparently caved into political pressure from the US in backing out of a $10 billion gas project in Iran.

Shell and its partner, the Spanish oil firm Repsol, are not going ahead with phase 13 of the giant South Pars project on the border with Qatar, the company confirmed this morning.

The two companies signed a deal last year with the Iranian national oil company to develop phases 13 and 14 of South Pars.

They have now agreed "the principle of substitution of alternative later phases" for the project, Shell said in a formal statement, which would allow other oil companies to step in.

Total, the French oil company that is also involved in South Pars, confirmed this morning it was still interested in the project despite the withdrawal by Shell and Repsol.

Shell is considering taking part in phases 20 and 21, which are a long way off being developed, the statement added.

America has been putting political pressure on Western companies not to participate in projects in Iran because of suspicions that the Islamic regime is developing a nuclear arms programme.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive