Iranian car maker Iran Khodro is demanding compensation from Turkey's Tofas, accusing it of a breach of contract in bowing to US pressure to pull out of a deal, the car maker's lawyers said on Saturday.
Iran Khodro said the Turkish company reneged on an agreement to supply engines when leant on by US giant General Motors, one of its stakeholders.
Tofas was not immediately available to comment.
US companies are encouraged to follow Washington's policy of isolating the Islamic Republic, which it accuses of seeking nuclear arms, through a trade embargo.
"They (Tofas) are liable to pay at least 80 million euros," said one lawyer.
A letter to Tofas from Khodro states the Iranians' dissatisfaction at being left in the lurch and accuses the Turkish firm of insufficiently investigating its embargo obligations.
"You are reneging on your signed and binding agreement to supply the engines," said the document obtained by Reuters.
The letter adds that General Motors told Tofas in June 2003 that the deal could not go ahead.
"However, in place of immediately informing us to plan for such a possible disruption in our supplies from you to mitigate our damages, you kept Iran Khodro in the dark until September 2003."
Iran Khodro said Tofas had suggested an alternative engine supplying facility in Argentina that was itself about to be sold. The Iranians said this proposition sounded precarious.