Gov. Pawlenty is seeking clarification from federal officials over Essar Global Ltd.'s involvement with an Iranian oil refinery.
Essar is the company that just bought Minnesota Steel Industries, a $1.6 billion iron mine and steel mill project to be built in Itasca County.
The project had been highly anticipated because it could produce 700 jobs in a region that sorely needs new economic development.
Pawlenty says he'll withhold state bonding money for the project if Essar is indeed investing in Iranian oil production, which would be a violation of the Iran Sanctions Act, which was meant to limit international investment in that country.
The law gives the U.S. government power to punish foreign companies with interests in this country if they make more than $20 million in investments in Iran's energy sector in one year, according to the Congressional Research Service.
An anonymously sourced Reuters news report last week said Essar was in talks to build an $8 billion to $10 billion oil refinery in southern Iran. An Essar official hasn't returned multiple phone messages from The Associated Press.
"I've been to a lot of funerals for our fallen soldiers in this country, and many of them have been killed by IEDs. And Iran is a country that is a terrorist nation that has been accused of putting together armaments; groups of individuals in that country, that have killed our soldiers," said Pawlenty.
Pawlenty says he's sent letters to Secretary of State Condoleezza Rice, as well as the U.S. ambassador to India, seeking guidance about how they view the matter.
Pawlenty says meetings between U.S. officials and Essar have been accelerated, and will take place this week.
"We hope that out of those meetings would come a clear signal and committment by Essar that they're not going to move forward with any involvement with respect to this refinery in Iran," said Pawlenty. "That's my hope, and we are optimistic that they may make that kind of statement."
Itasca County is asking for state bonding to build infrastructure to the steel plant near Nashwauk.
(The Associated Press contributed to this report)