Iran raised half a billion dollars in its first international offering since the Islamic revolution of 1979.

European investors bought a third of the eurobond offering, according to the underwriters, BNP Paribas and Commerzbank.

Money managers see the offering as a major sign of change in Iran, which remains on the United States blacklist as a sponsor of terrorism.

Iran's five-year eurobonds bear yields of 8.95%, less than the 23% Brazil is paying on dollar-denominated government bonds. Russia is paying 8.67% on eurobonds coming due in 2007, and Turkey has to pony up 14.7% on eurobonds maturing in 2007.

The European banks were evidently not deterred by the American business embargo on Iran. Fund managers decried U.S. president George Bush's policy of disengagement from terror-supporting nations.

There is no proof that Iran supported the September 11 attacks on the United States, they say, and good business relations could lead to improved diplomatic relations.

International fuel companies have maintained contact with Iran, and invested in it too by virtue of its being OPEC's second-biggest oil producer.

Iran has the lowest national debt relative to its GDP among the 60 countries covered by the rating agency Fitch. Unlike other emerging nations, it never defaulted on debt, and has maintained a positive balance of payments for eight years.

Fitch rates Iran's eurobonds at B-plus, the same level as bonds offered by Brazil, Uruguay and Romania. Moody's withdrew its credit rating for fear of breaching the American embargo, dating from 1987.

Iranian critics of the offering are reportedly concerned that paying interest on the loan flouts the Islamic prohibition of usury.