Iran criticised U.S. President George W. Bush yesterday for renewing sanctions against the Islamic republic, calling the move "illogical" and against international norms.

"America's unilateral sanctions are aimed at imposing its will on other countries," Iran's state television quoted Foreign Ministry spokesman Hamid Reza Asefi as saying. "They are a sign of a lack of logic and contrary to international norms."

Bush signed a five-year extension of sanctions against Iran and Libya to curb foreign investment in their oil and gas sectors.

The U.S. sanctions, first imposed in 1996, seek to penalise any non-U.S. oil firm that invest more than $20 million in Iran. The measure is intended to punish the Islamic republic for its alleged support for international terrorism.

Oil Minister Bijan Zanganeh said earlier that the sanctions hampered Iran's drive for foreign investment and technology to modernise its ageing oil sector.

Although there have been some foreign venture in Iran's oil and gas industries in the form of "buy-back" deals, Tehran is keen for cooperation with U.S. companies. "Eighty per cent of oil companies in the world are American. Neither us nor American firms are benefiting from these sanctions," Zanganeh said told Iran's official news agency IRNA.

The U.S. Iran Libya Sanctions Act (ILSA), first imposed in 1996, seeks to penalise any non-U.S. oil firm that invest more than $20 million in Iran. The measure is intended to punish the Islamic republic for its alleged support for international terrorism.

Zanganeh said Iran needed foreign investment and technological assistance to boost its oil production capacity and develop its vast untapped natural gas reserves.

"To maintain our Opec quota and share of the world market, we have no choice but make new investment in the upstream oil sector," he said. "If we do not do so, our neighbours will continue to develop (offshore) fields they have in common with us. They are not going to wait for us to start."

The minister said Iranian oil facilities were at least 30 years old, adding that production had fallen by 1.5 million barrels a day in the past five years because of ageing facilities. Some 80 per cent of an estimated one million square kilometre (386,000 square mile) of fossil layers in Iran remain unexplored due to lack of investment, he said.

The situation is equally dismal in the gas sector. "We have the world's second largest gas reserves, but we are exporting little gas due to the lack of investment," Zanganeh said, putting Iran's gas reserves at 26 trillion cubic metres.

The minister defended the award of "buy-back" oil and gas contracts with foreign companies, dismissing a barrage of internal criticism as motivated by personal reasons.

"The buy-back deals provide us with the financing, the latest technology and superb management," he said, quoted by Iran's student news agency ISNA. "Those who oppose them do so because their personal interests are at stake."

Under buy-back terms, a company recoups its capital expenditure and profits by receiving payment taken in the form of oil or gas output. Iran adopted this formulation in the mid-1990s to skirt a constitutional ban on foreign ventures in major sectors.

Zanganeh said since 1997 Iran had drawn $22 billion in buy-back ventures, adding that $2.5 billion of it had already been paid back (in output). He did not elaborate further.

He said Iran hoped to increase its crude output to 4.7 million barrels a day in four years from less than four million barrels a day now. The minister said with modern technology Iran could improve the present oil recovery rate of about 20 per cent.

"We have an estimated 500 billion barrels of crude in place. If we can increase the recovery rate by even one percent, that will give us five billion barrels of new oil worth $100 billion," he told ISNA.