EU states back new sanctions on Iran

By Mark John

BRUSSELS (Reuters) - European Union states agreed on Monday to impose new sanctions against Iran, including an asset freeze on its biggest bank, over its refusal to meet demands to curb its nuclear program.

But the EU said the door remained open to possible talks over an international package of incentives delivered to Tehran earlier this month by EU foreign policy chief Javier Solana for Iran to suspend uranium enrichment.

The new EU sanctions are the latest attempt by the West to put pressure on Iran over the nuclear issue and will target businesses and individuals the West alleges are linked to its nuclear and ballistic programs.

"The individuals will be banned from entering the EU and the entities will be banned from operating in the EU," said an EU official, who wanted to remain anonymous, after EU ministers rubber-stamped the measures at a meeting in Luxembourg.

The EU was due to publish the names of those affected on Tuesday but the official said Bank Melli would face an asset freeze under the moves, while the visa bans would target "very senior experts" inside Iran's nuclear and ballistic programs.

"Its impact (will be) more expensive imports," Iranian analyst Saeed Laylaz said of the impact on Iran of the move against Bank Melli, a key supplier of export guarantees.

"The economy of Iran will be more dependent on Chinese markets," he added of a growing shift in Iran's focus to Asia that has seen Europe's share of the Islamic Republic's trade dwindle to 25-30 percent from twice that five years ago.

The European sanctions follow a similar U.S. asset freeze imposed on Bank Melli last year and a senior U.S. Treasury official hailed them as another step in isolating Tehran from the international financial system.

"Now that you have Europe really stepping up and trying to take tangible action, it really underscores the fact that it isn't just the U.S. that's doing it," said Daniel Glaser, assistant secretary for terrorist financing and financial crimes.

"I'm optimistic that we're going to be able to find traction in the Gulf and in Asia" to put additional financial pressure on Iran, he added.

Bank Melli has branches in Paris and Hamburg and a unit in London called Melli Bank Plc. A source close to the subsidiary said it was seeking information from British authorities on whether and how the sanctions would affect it.

CARROT AND STICK

The EU official stressed the sanctions were based on measures agreed by the U.N. Security Council and that six powers -- the five permanent members of the Council plus Germany -- still sought an answer from Iran to their incentives offer.

"We are continuing with the double-track," the official said of the carrot-and-stick policy that has until now not induced Iran to curb a nuclear program, suspected by the West of being a cover for making an atom bomb.

The United States and the EU agreed this month they were ready to take additional steps aimed at ensuring Iranian banks could not back proliferation and terrorism.