Malaysia said today it was ready to suspend free-trade talks with the United States after criticism over an energy deal with Iran, and warned it would not be "held hostage" to political demands.

The Ministry of International Trade and Industry condemned US lawmaker Tom Lantos' call for a halt in the trade negotiations over a US$16 billion deal signed in January between the state-owned National Iranian Oil Company and Malaysia's SKS Group.

"Malaysia reiterates that the FTA negotiations cannot be held hostage to any political demand, and cannot be conducted under such threats," it said of the free-trade agreement (FTA) talks.

"Malaysia is also ready to suspend negotiations if the situation warrants it," it said ahead of a crucial fifth round of negotiations which will likely determine whether a deal is reached before a March deadline.

"It is now up to the US administration to make its official position known, in order for Malaysia to decide on the future of the negotiations."

Next week's talks between the US and Malaysia are seen as a last chance to establish a deal before President George W Bush's powers to strike free trade deals expire in June.

Both sides have already expressed fears that they will fail to meet the deadline, with talks bogged down in sensitive areas including the services sector, investment and government procurement.

Will not bow to political pressure

The trade ministry said the negotiations were launched on the understanding that there would be "no political agenda and no interference into domestic policies."

"The call by Tom Lantos to suspend the free trade agreement negotiations because of a business deal by a Malaysian company with the National Iranian Oil company does not augur well for the negotiations," it said.

"No country can determine how companies in another country should conduct business."

Prime Minister Abdullah Ahmad Badawi also said today that Malaysia would not bow to political pressure from Washington.

"We reject the pressure being inflicted upon us. We are a sovereign country and have our own stand," he said according to the official Bernama news agency.

"This is a question of business. Do not insert politically-related matters to the talks. For this agreement, no political matter is needed to be brought to the negotiating table," he said.