EU approves ban on Iran oil imports, central bank sanctions

European foreign ministers approve oil embargo set to take effect on July 1; Ashton says sanctions aimed at pressuring Tehran into resuming nuclear negotiations.

European Union flags in Brussels 311 (photo credit: Thinkstock/Imagebank)
European Union flags in Brussels 311
(photo credit: Thinkstock/Imagebank)
BRUSSELS - European Union governments agreed on Monday to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, a move to put pressure on Tehran's disputed nuclear program by shutting off its main source of foreign income. However, to protect Europe's economy as it battles to overcome a debilitating debt crisis, the governments agreed to phase in the embargo, giving countries with existing contracts with Iran until July 1, 2012 to end those deals.
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At a meeting of foreign ministers in Brussels, EU governments also agreed to freeze the assets of Iran's central bank and to ban all trade in gold and other precious metals with the bank and other public bodies, EU officials said.
Western powers hope the far stricter sanctions net, which brings the EU more closely into line with U.S. policy, will force Iran to scale back or halt its nuclear work, which Europe and the United States believe is aimed at developing weapons. Iran says it is enriching uranium solely for peaceful purposes.
EU foreign policy chief Catherine Ashton said she wanted financial sanctions to persuade Tehran to return to negotiations with the West , which she represents in talks with Iran.
"I want the pressure of these sanctions to result in negotiations," she told reporters before the ministers met.
"I want to see Iran come back to the table and either pick up all the ideas that we left on the table ... last year ... or to come forward with its own ideas," she said. Russia believes there is a good chance that talks between global powers and Iran on Tehran's nuclear program could resume soon despite the planned  embargo and other sources of tension, Foreign Minister Sergei Lavrov said on Monday.
"We still have a strong hope to resume talks in the nearest future," Lavrov told reporters, referring to long-dormant talks between Iran and six global powers - Russia, China, the United States, Britain, France and Germany.He said Russia would try to deter both Iran and the West from making counterproductive moves and would seek a resumption of the talks, which are aimed at reining in Iran's nuclear program and easing concerns it could be seeking nuclear arms.
Tehran says its nuclear program is necessary to meet its rising energy needs, but the United Nations' International Atomic Energy Agency said last year it had evidence that suggested Iran had worked on designing a nuclear weapon. EU sanctions follow fresh financial measures signed into law by US President Barack Obama on New Year's Eve and mainly targeting the oil sector, which accounts for some 90 percent of Iranian exports to the EU. The European Union is Iran's largest oil customer after China.
Taking measured steps
Economic considerations weighed heavily on EU preparations for the embargo in recent weeks because of the heavy dependence of some EU states on Iranian crude. Greece, which is at the heart of the debt crisis, is almost entirely dependent on Iranian oil. It must now seek alternative sources. Diplomats will return to the issue of oil sanctions before May, officials said, to assess whether the measures are effective and whether EU states are succeeding in finding sufficient alternative resources. Saudi Arabia, Kuwait and other oil-rich states in the Gulf are expected to increase their output of crude oil to offset the loss of access to Iranian exports. "There will be a review of the embargo before May," one EU official said. The review could potentially affect the date when the full ban takes effect, diplomats said. Greece, which depends on financial help from the EU and the International Monetary Fund to stay afloat, gets nearly a quarter of its oil from Iran, thanks to favorable financing terms from Tehran. "The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution," a senior EU official told reporters on Friday. With a significant part of EU purchases of Iranian oil covered by long-term contracts, the grace period will be an important factor in the effectiveness of the EU measures. The unprecedented effort to take Iran's 2.6 million barrels of oil per day of exports off international markets has kept global prices high, pushed down Iran's rial currency and caused a surge in the cost of basic goods for Iranians.