UPDATE 2-EU states consider delay on any Iran oil ban

Fri Jan 6, 2012 12:40pm EST

Related Topics

* Western governments targeting Iranian oil

* EU ban may need several months to take effect

* Worries over economic impact complicate EU plans

* Sanctions on Iranian central bank disputed (Adds diplomats on central bank)

By Justyna Pawlak

BRUSSELS, Jan 6 (Reuters) - A European Union embargo on Iranian crude oil imports could take a few months to start because some EU capitals want a delay they say they need to shield their debt-stricken economies, diplomats said on Friday.

EU states have agreed in principle to an embargo on Iranian oil, part of the latest Western effort to ratchet up pressure on Tehran over its nuclear programme.

Details of how the ban would be imposed are being discussed in Brussels, with the goal of a final decision by month's end.

Diplomats said EU countries have proposed "grace periods" on existing contracts of between one month and 12 months.

Greece, which depends heavily on Iranian crude, is pushing for the longest delay, the diplomats said. Britain, France, the Netherlands and Germany wanted a maximum grace period of three months.

"There is a range of ideas from one month to one year with countries who are more dependent on Iranian oil pushing for more time," one EU diplomat said, speaking on condition of anonymity.

European measures against Iran's oil industry will complement U.S. sanctions announced on New Year's Eve that aim to make it impossible for most countries' refineries to buy Iranian crude.

Iran is the second-largest producer of oil, after Saudi Arabia, among the 12 countries in OPEC, producing around 3.5 million barrels per day.

COSTLY MEASURES

As tensions between Iran and Western governments mount, several EU governments have argued that economic considerations ought to play a role in EU sanctions at a time when Europe faces a debt crisis and deep fiscal austerity.

EU countries buy about 500,000 barrels per day (bpd) of Iran's 2.6 million bpd in exports, making the bloc collectively the largest market for Iranian crude, rivalling China.

The three biggest EU importers have serious debt problems. Greece imports a quarter of its oil from Iran, Italy about 13 percent and Spain nearly 10 percent.

Prime Minister Mario Monti said this week Italy would push for a gradual introduction of the embargo and would ask that deliveries to repay Tehran's debts to Italian energy firm ENI be exempted from the sanctions.

Other aspects of the prospective embargo are being discussed and a final decision is unlikely to be quick, diplomats said. Some EU capitals are suggesting the impact of sanctions be reviewed after a fixed period, with the possibility of suspending them if they prove ineffective.

The U.S. and EU sanctions have caused a steady rise in oil prices this week. International Brent futures were trading above $113 a barrel on Friday, a rise of more than $6 a barrel since U.S. President Barack Obama signed the new sanctions into law.

One area of disagreement in Brussels, diplomats say, is the possibility of imposing sanctions against the Iranian central bank, to match Obama's move.

Several diplomats have told Reuters it appeared unlikely, for now, that EU governments would agree to cut off dealings with the bank at the same time as they impose the oil embargo.

Some capitals have raised concerns, they said, that sanctions on the central bank would harm the chances of getting Tehran to negotiate over its nuclear work.

Talks over the programme remain frozen, with Tehran saying it aims to produce energy for peaceful purposes and not, as Western governments fear, to make weapons.

Turkish foreign minister Ahmet Davutoglu said on Thursday that Ankara has delivered a Western offer to Tehran to renew negotiations over the programme. He expressed hope that talks that stalled a year ago could be soon revived. (Additional reporting by Julien Toyer and Ilona Wissenbach. Editing by Sebastian Moffett and Richard Meares.)

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