The US energy firm Chevron negotiated with Tehran about developing an Iraq-Iran cross-border oilfield in spite of tight US sanctions, according to the Iraqi prime minister in leaked diplomatic cables.

Nouri al-Maliki's claim, reported in the cables, that Chevron was in discussions with the Iranian government will raise eyebrows in Europe and other parts of the world where international companies have come under significant pressure from Washington to end investments and other financial dealings with Tehran.

Chevron declined to either confirm or deny that it had been in contact with Iran, and confined its reaction to a statement saying it had not done, and would not do, anything in violation of US law.

The US treasury and state department confirmed that strict sanctions remain in place. That sanctions policy is aimed at trying to persuade the Iranian government to end what Washington claims is a covert attempt to secure a nuclear weapon. Tehran denies the charge.

The leaked cable from the US embassy in Baghdad provides intriguing details of a discussion between Maliki and the then US charge d'affaires in Iraq, Patricia Butenis, on 19 March last year.

Butenis says: "With regard to hydrocarbons, the PM asked for the US position on direct contracts with US firms and on US firms developing cross-border fields on the Iran border."

She adds: "The PM said he is currently in negotiations with Chevron to develop various oilfields to include a cross-border oilfield with Iran (NFI). The PM claimed that Chevron had told him that it had already raised the issue of a cross-border development with Tehran as well. (Note: We have no independent confirmation of this; end note.)"

The cable does not identify the oilfield.

According to the cable, Maliki asked "about the political feasibility of such a deal involving a US firm working both sides of a cross-border field, given current USG [United States government] policies toward Iran".

Butenis told him that US laws on sanctions would apply but that the Obama administration was reviewing its policies on Iran. "PM al-Maliki said that he prefers to go with Chevron on the deal; however, he remarked that if US rules prevent Chevron from doing this project, he would approach a non-American firm."

Lloyd Avram, a spokesman the for California-based energy firm, said: "Chevron acts in full compliance with US law. We have not engaged in business discussions that are, or could potentially be, in violation of US law. Any suggestion to the contrary is false."

Marti Adams, a spokeswoman at the US treasury, which implements sanctions policy, confirmed that America had stringent sanctions in place in relation to the Iranian oil industry. "US persons may not trade in Iranian oil or petroleum products refined in Iran, nor may they finance such trading. Similarly, US persons may not perform services, including financing services, or supply goods or technology that would benefit the Iranian oil industry."

A US state department source said that after a first round of bids in June 2009, there were news stories that Iraq's government was in talks with Chevron to develop the Majnoon oilfield. It is one of the richest in the world, near Basra and the Iranian border.

The source said: "Those talks were never finalised into a contract. Majnoon was offered in a tender that was held in December 2009. Majnoon was awarded to a consortium led by Royal Dutch Shell and Malaysia's Petronas."

The source added: "It is inconclusive if Majnoon is a border field or not with Iran. The development of cross-border fields could be problematic under existing sanctions law [both in 2009 and now]."