(Updates with agreement, adds U.S. comments)
By David Brunnstrom
LUXEMBOURG, Oct 15 EU foreign ministers agreed on Monday to strengthen sanctions against Myanmar's military rulers in response to a crackdown on protests last month and warned they could go further and ban all new investment.
The ministers agreed to broaden sanctions that include visa bans and asset freezes on generals, government officials and their relatives, and to take new steps targeting the country's key timber, metals and gemstone sectors.
"The EU deems it necessary to increase direct pressure on the regime," the ministers said in a statement issued after talks in Luxembourg.
"It will therefore adopt a package of measures that do not harm the general population but that target those responsible for the violent crackdown and the overall political stalemate in the country."
The new measures include an export ban on equipment to sectors involving timber, metals, minerals, semi-precious and precious stones plus import and investment bans on the sectors.
Ministers instructed experts to look at further steps, which could include a ban on all new investment in the country.
British Foreign Secretary David Miliband told reporters such additional steps would be imposed if Myanmar's military rulers failed to participate in a U.N.-facilitated dialogue with political opponents.
The United States told Myanmar's rulers to stop its crackdown against pro-democracy dissidents and also threatened more sanctions.
The U.S. Treasury last month imposed sanctions on senior military government officials and State Department spokesman Tom Casey said on Monday more punitive measures were being considered. He did not give details.
CARROTS AND STICKS
The EU has stressed that its trade -- and therefore economic leverage -- with Myanmar is limited, though it has so far steered clear of Myanmar's energy sector, in which French oil giant Total is a big investor.
In an opinion piece in the International Herald Tribune, French Foreign Minister Bernard Kouchner and Miliband said incentives were needed too.
"The EU needs to consider a package of positive measures to the Burmese people should the regime show its willingness to genuinely work for reconciliation," they wrote.
Miliband reiterated this message to reporters in Luxembourg. "If they do that, there will be economic incentives and economic support for the people of Burma," he said.
EU External Relations Commissioner Benita Ferrero-Walder said she had favoured a delay in imposition of the additional sanctions to support the mission of U.N. envoy Ibrahim Gambari, but noted there was a review clause in case of progress.
"He is the only one who has a chance for leverage at the moment," she said earlier. "I think he should have sticks and carrots in order to be able to work."
The EU ministers demanded an immediate end to violent repression in Myanmar, formerly Burma, and called for the release of all political prisoners including Nobel prize-winning opposition leader Aung San Suu Kyi.
Despite international outrage at the crackdown, Myanmar's rulers have been cranking up the pressure, stage-managing pro-government rallies in Yangon. Police are still raiding homes and arresting activists more than two weeks after the demonstrations were crushed. (Additional reporting by Mark John)