EU to Target Iran’s Oil, Gas Industries in Widened Sanctions

European Union governments will target Iran’s oil and gas industries in backing U.S. calls for widened sanctions against the Iranian nuclear program, a draft EU declaration said.

European penalties will hit “key sectors of the gas and oil industry with prohibition of new investment, technical assistance and transfers of technologies, equipment and services,” according to a statement prepared for today’s EU summit.

Last week’s United Nations resolution called for restrictions on financial transactions with Iran, a tighter arms embargo and authority to seize cargo potentially usable in nuclear weapons or missiles. It didn’t mandate curbs on Iran’s energy industries.

Iranian President Mahmoud Ahmadinejad yesterday threatened “severe retaliation” against countries that slap sanctions on the atomic activities, suspected by the U.S. and its allies as paving the way for Iran to join the nuclear-weapons club.

Draft Iranian legislation would require the government to strike back at attempts to inspect Iranian ships in Strait of Hormuz, the route taken by 20 percent of the world’s oil, said Kazem Jalali, spokesman for the parliament’s National Security and Foreign Policy Committee.

Iran has ignored three previous sets of UN Security Council sanctions against the nuclear research, which it says is intended for energy production to support a growing population.

Asset Freeze

Passed on June 9 in a 12-2 vote with one abstention, the latest resolution also freezes the assets of 40 companies, banks and government agencies, and bars foreign travel by Javad Rahiqi, head of a branch of the Atomic Energy Organization of Iran.

While silent on possible energy sanctions, the resolution leaves the door open for curbs on Iran’s oil and gas output by noting the “potential connection” between oil revenue and the financing of the nuclear operations.

Europe’s sanctions, going beyond the letter of the UN resolution, will focus on “refining, liquefaction and liquid natural-gas technology,” according to the EU draft, which may be modified at the meeting of leaders in Brussels.

In line with the UN accord, EU governments will also target “dual use” goods with potential military applications and trade insurance, while imposing additional curbs on Iranian banks and the cargo operations run by the Islamic Republic of Iran Shipping Line.

Britain led the push within Europe for tighter sanctions, with Foreign Secretary William Hague calling on the EU on June 14 “to increase the legitimate pressure on Iran, to look at what can be done in terms of investment in oil and gas in Iran.”

Ahmadinejad said yesterday Iran is ready to resume talks on the nuclear issue, while saying that “the conditions of dialogue have changed.” That leaves the door open for negotiations offered on June 14 by EU foreign policy chief Catherine Ashton, the international community’s liaison on the nuclear program.

While calling for a “diplomatic solution,” the EU draft also said it is time for Iran to engage in “serious negotiation.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE