EU readies unprecedented Iran oil, bank sanctions

The European Union is readying its toughest action to date against Iran, moving to dry up funding of its contested nuclear drive by targeting both its oil and financial sector, diplomats said Friday. Foreign ministers from the 27-nation bloc meeting in Brussels on Monday are expected to agree to sanction Tehran's central bank -- and possibly other banks -- and announce an embargo on purchasing Iranian oil, EU officials and diplomats said. In the build-up, French President Nicolas Sarkozy urged "much tougher, more decisive sanctions" as a means of avoiding military action while German Foreign Minister Guido Westerwelle warned Iran was endangering world peace. "Those who do not want to reinforce sanctions against a regime which is leading its country into disaster by seeking a nuclear weapon will bear responsibility for the risk of a military breakdown," Sarkozy said. Westerwelle said Monday's new "very substantive sanctions" aimed to make the point that Iran's nuclear behaviour "is unacceptable and a danger to world peace." Also expected Monday are bans on the sale of gold, diamonds and other precious metals to Iran and any delivery of newly minted coins and notes. Existing bans on petrochemical imports and investment are to be enlarged. Reports however of an imminent resumption of international talks with Iran on its disputed nuclear programme were dashed by EU foreign policy Catherine Ashton, who represents global powers in the negotiations. Her office said the powers still "are waiting for the Iranian reaction" to a letter sent by Ashton to Tehran months ago offering to re-start the talks but only "without pre-conditions." Greece's dependency on Iranian oil meanwhile was holding up a deal on the timing and conditions of the oil embargo. The political will was there, but the bloc was still looking for new suppliers able to match the easy conditions offered by Tehran to the cash-strapped nation. Greece, which relies on Iranian oil for more than a third of its oil imports, had concluded "good financial arrangements" with Iran that include 60-day payment and no financial guarantees, sources said. "Greece has agreed on a political level to stop its imports from Iran, the question is who can compensate," a diplomat said. "Of course it will be more difficult to find alternative suppliers because of the present financial situation of Greece." Diplomats said a political decision on the embargo was expected from the ministers on Monday although "the financial solution will require more time." The new EU sanctions are part of a concerted effort with the United States to pressure Iran into halting its controversial nuclear activities, which the West suspects are aimed at developing nuclear weapons. Iran says its nuclear programme is purely for civilian use. The EU imported some 600,000 barrels of Iranian oil per day last year, according to the International Energy Agency, making it a key market alongside India and China, which has refused to bow to pressure from Washington. Iranian oil accounted for 34.2 percent of Greece's total oil imports, 14.9 percent of Spain's and 12.4 percent of Italy's in the first nine months of last year, according to the latest EU statistics. With the three nations all suffering financial difficulties, weeks of talks on an oil embargo have stumbled on a deadline for EU importers to phase out existing contracts. Britain, France and Germany called for a three-month deadline, whereas Greece requested up to a year. A compromise under discussion would see the embargo take full force in five months on July 1. Under discussion too has been a request from Italy to allow Iranian companies to continue repaying debts with crude instead of cash, a move which some argue would mean Tehran having less crude to sell on the market. EU nations too have been divided over when to review the embargo to assess its impact on the likes of Greece, and whether it is undermining the global oil trade as well as Iran's economy. Already agreed is a deal to sanction Iran's central bank to freeze assets used to finance its nuclear drive. The freeze would be partial "enabling legitimate trade to go ahead", and ensuring there were no obstacles to continued payment of outstanding Iranian debts to Europe, an EU diplomat said. Germany notably expressed concern over the reimbursement of loans to Iran worth 2.6 billion euros should financial channels be closed.