June 23, 2008 / 1:10 PM / 11 years ago

EU states back new sanctions on Iran

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.

Iranian President Mahmoud Ahmadinejad visits the Natanz nuclear enrichment facility, south of Tehran, April 8, 2008. REUTERS/Presidential official website/Handout

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.


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.

Diplomats say there are exploratory talks in the West about the possibility of targeting Iran’s energy sector with future sanctions.

Iran insists its nuclear work is a peaceful program, but the dispute has sparked fears of military confrontation and helped push up oil prices to record highs.

Iran’s oil minister has put its windfall crude export earnings at $6 billion per month and acting economy minister Hossein Samsami said at the weekend existing sanctions were not having a major impact on the country’s economy.

Iranian weekly Shahrvand-e Emrooz reported this month that Iran had withdrawn $75 billion from Europe to prevent the assets from being blocked, but Samsami played down such reports and insisted the situation was “as yet not serious.”

The new incentives offer is based on an updated version of one rejected by Iran in 2006 and includes help in developing a civilian nuclear program and trade benefits.

Slideshow (2 Images)

Diplomats on Friday said major powers had offered Iran preliminary talks on its nuclear program, on condition it limit enrichment to current levels for six weeks in exchange for a freeze on moves towards harsher sanctions.

Earlier, Iran said it was encouraged by similarities between the offer and proposals it has put forward to defuse the row, but again rejected suspending uranium enrichment.

Additional reporting by David Lawder in Washington, Jeremy Smith in Luxembourg, Fredrik Dahl in Tehran and Mark Trevelyan in London; Editing by Richard Balmforth and Vicki Allen

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