By Doug Palmer

WASHINGTON, Oct 17 (Reuters) - U.S. companies doing business in the European Union, China, Russia and other countries could face retaliation if a bill aimed at pressuring Iran to give up nuclear weapons becomes law, industry officials said on Wednesday.

The bill, which passed the U.S. House of Representatives last month by a vote of 397-16, strengthens rarely used U.S. sanctions aimed at foreign companies that invest $20 million or more in Iranian energy.

The bill puts the United States on a collision course with countries it has been working with to persuade Iran to give up its nuclear program, said Bill Reinsch, president of the National Foreign Trade Council, which includes major exporters and oil companies among its members.

"The effect of this is going to be entirely on European, Chinese, Russian and Japanese companies, maybe a few others. So, we are going to be sanctioning companies in the very countries that the president is trying to get to cooperate with us on multilateral sanctions," Reinsch said.

It's likely those countries will retaliate against U.S. companies if Washington were to impose sanctions on their companies for actions that are legal under their own laws, Reinsch said.

"The Chinese, in particular ... tend to retaliate when you take actions against them. I don't have much doubt if we were to sanction a Chinese state-owned company that the Chinese would take some action against American interests," he said.

The bill closes a loophole in the current U.S. law by requiring the White House to send Congress a list of foreign investment activity in Iran's energy sector every six months.

That gets rid of one way both Republican and Democratic administrations have avoided imposing sanctions under current law -- by never finishing an investigation into whether an investment has occurred.

Another provision of the bill prohibits the U.S. government from providing Iran with replacement parts and upgrades for aging civilian aircraft purchased from the United States before 1979, when trade curbs were imposed.

The bill would also decrease U.S. contributions to the World Bank if the bank invests in Iran, and bar a nuclear cooperation agreement with Russia if Moscow continues to assist Tehran's nuclear program.

Ed Rice, president of the Coalition of Employment through Exports, said he feared the Senate would pass similar legislation, possibly as early as this year.

The overwhelming House vote seems to suggest lawmakers have lost faith in Bush administration efforts to pressure Iran using multilateral means, he said.

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