The trade ministry condemned US lawmaker Tom Lantos' call for a halt in the trade negotiations over a 16 billion dollar 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, a predominantly Muslim nation, 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.