The foreign affairs panel of the House of Representatives passed the proposed law by 37 votes to one, with Democrats and Republicans alike accusing Iran of using energy investment for nefarious ends.

"Foreign investment in Iran equals money for terrorism and attacks on Americans," Democrat Gary Ackerman said.

"Investment in Iran's petroleum sector enables that country to pursue nuclear weapons, to arm insurgents fighting American troops, and to underwrite Hezbollah and Hamas," he said.

The United States already has a slew of economic sanctions on Iran dating from the 1979 Islamic revolution.

The United Nations has also toughened sanctions on Iran to punish its refusal to halt uranium enrichment, which the West suspects is aimed at building a nuclear bomb.

But the new bill would close a loophole that has allowed the administration of President George W. Bush to waive sanctions against foreign energy companies that continue to court lucrative deals in Iran.

In the absence of the US energy giants, European and Japanese companies have profited from the exploration and distribution of oil and natural gas from Iran.

The House committee's chairman, Tom Lantos, accused the Bush administration of "abusing its waiver authority" by never sanctioning any foreign oil company that has invested in Iran.

"By now every single European leader fully understands, and acknowledges, that Iran is hell-bent on acquiring nuclear weapons," he added.

"It is time for Europe to cease investing in Iran's energy industry, and our legislation will facilitate that result."

Supporters of the bill pointed to an increasing reluctance by European and Japanese banks to deal with Iran's financial system, after the US Treasury blacklisted two leading Iranian lenders.

Last week, Treasury Secretary Henry Paulson urged US allies to help cut off Iran's banks from the global financial system, accusing the Iranian Revolutionary Guard of funding and training Middle East militant groups.

The bill under debate in the House would designate the Revolutionary Guard a "terrorist organization."

Lantos said that Iran's foremost military arm was "a major base of support" for President Mahmoud Ahmadinejad and "owns huge economic enterprises in Iran."

Several members of the House committee, invoking the war in Iraq, said they wanted to tighten sanctions to give diplomacy and not military power the best chance of success against Iran.

"We want sanctions, not bullets," Republican House member Chris Smith said.

The committee's vote means the legislation can move to debate in the full House, where Lantos said it enjoyed support from about 300 of the 435 members. A Senate version must also be passed before the bill can become law.

Last month, Democratic presidential hopeful Barack Obama introduced a similar bill in the Senate encouraging investors to cash out of projects that benefit Iran.

If the twin bills become law, the legislation would require the US government to a compile a list every six months of companies that have an investment of more than 20 million dollars in Iran's energy sector.

Obama accused Tehran of using lucrative energy revenues "to build its nuclear program and to fund terrorist groups that export its militaristic and radical ideology to Iraq and throughout the Middle East."

"Pressuring companies to cut their financial ties with Iran is critical to ensuring that sanctions have their intended result," he said.

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