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EU Tightens Iran Sanctions in Bid for Deal on Atomic Program

The European Union tightened sanctions on Iran in a bid to persuade Tehran to permit more international scrutiny of its nuclear program and avert a possible military conflict.

The European Union tightened sanctions on Iran in a bid to persuade Tehran to permit more international scrutiny of its nuclear program and avert a possible military conflict.

EU foreign ministers in Luxembourg today approved extra curbs on trade with Iran and on its finance, energy and transport industries following an oil embargo and a central-bank asset freeze earlier this year. The ministers also froze the assets of 34 Iranian entities to hinder the Iranian government’s ability to raise funds for its atomic program, which the U.S. and EU say is aimed at producing weapons.

The new measures, which complement U.S. restrictions and are meant to close loopholes in existing European sanctions, come after global talks on Iranian atomic activities yielded little progress in recent months and the Israeli government warned of a growing threat of a nuclear-armed Iran. The Islamic republic says its atomic program is for civilian purposes.

“The EU’s message today is clear: Iran should not underestimate our resolve,” U.K. Foreign Secretary William Hague said in an e-mailed statement. “We will continue to do all we can to increase the peaceful pressure on Iran to change course and to return to talks ready to reach a negotiated solution by addressing the world’s concerns.”

Research Reactor

The Gulf nation has increased production of 20 percent enriched uranium and grew its stockpile of low-enriched uranium, the International Atomic Energy Agency said on Aug. 30. Highly enriched uranium can be used to produce electricity or to manufacture an atomic bomb.

The Islamic republic today reiterated an offer to suspend domestic production of medium-enriched uranium in exchange for fuel for its Tehran Research Reactor, according to Press TV.

While Iran has the right to nuclear power for electricity purposes, it has to give up on any ambitions to develop nuclear weapons, German Foreign Minister Guido Westerwelle said, adding that the current EU approach is starting to pay off.

“We want a political and diplomatic solution,” Westerwelle said before the meeting. “Sanctions are beginning to work. That sanctions are beginning to work shows that a political and diplomatic solution is possible. So far, we haven’t seen sufficient readiness for substantial talks on the atomic program.”

‘Strict Conditions’

As a part of the package adopted today, the EU prohibited transactions between European and Iranian banks except for those “explicitly authorized in advance by national authorities under strict conditions,” to ensure that the bloc’s financial institutions don’t process funds that contribute to the Iranian nuclear program, according to an EU statement. Restrictions were also tightened on Iran’s central bank.

The sanctions will be published in the EU Official Journal tomorrow.

The new restrictions also include a ban on exports to Iran of materials that could be used in the Iranian nuclear and ballistic programs, in particular graphite, aluminum and steel as well as industrial software. In addition, the EU prohibited the import of natural gas from Iran and broadened the existing export ban on key equipment for the Iranian oil, gas and petrochemical industries.

Bank Transactions

Iran’s budget deficit may widen the most since at least 2007 as the U.S. and Europe starve Iran of foreign currency by imposing an embargo on oil, the country’s main export, and blocking other transactions in dollars and euros, according to International Monetary Fund forecasts published last week.

Oil output in Iran, previously the second-biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, has sagged to 2.63 million barrels a day in September from 2.85 million barrels in August, the International Energy Agency said in a report on Oct. 12. Exports will remain “quite low for the next few years,” according to Antoine Halff, the agency’s head of oil industry and markets division.

Furthermore, the package adopted today imposed new restrictions in the shipping industry, prohibiting the use of vessels that belong to EU citizens and companies for transporting or storing Iranian oil and petrochemical products. The ministers also banned flagging and classification services for Iranian oil tankers and cargo vessels and decided that EU nations will no longer support trade with Iran through new short-term export credits, guarantees or insurance.

‘Substantial’ Support

The sanctions list will be extended to include 34 entities that provide “substantial financial support to the Iranian government” and one person involved in the country’s nuclear program, according to the EU statement. The companies are active notably in the oil and gas industry and in the financial sector, the EU said.

Israel has threatened to attack to stop Iran’s nuclear program if the sanctions fail to curb it. Iranian leaders say they won’t back down.

“It’s very, very important that Iran is sent a very strong signal,” Catherine Ashton, the 27-nation EU’s foreign policy chief, said before today’s meeting. “We want to see a negotiated agreement.”

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Jonathan Stearns in Luxembourg at jstearns2@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net; James Hertling at jhertling@bloomberg.net

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