Jan. 23 (Bloomberg) -- European Union diplomats agreed to place an embargo on the import of Iranian oil with a phase-in period to July 1, an EU official said.
Foreign ministers of the 27-nation EU are expected to formally approve the embargo plan later today at a meeting in Brussels, the official said on condition of anonymity because the talks are private.
Iran has threatened to close the Strait of Hormuz, the Persian Gulf passageway for about 20 percent of globally traded oil, if the EU and the U.S. impose stricter sanctions. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Qatar and Kuwait ship crude and liquefied natural gas through the strait.
“We can keep the Straits of Hormuz open and we will do what is necessary to achieve that,” Ivo Daalder, the U.S. ambassador to NATO, said in a BBC Radio 4 interview today.
EU foreign ministers must balance their wish to act fast to pressure Iran to stop its nuclear program against the need to give some member states time to find alternative oil sources. EU foreign policy chief Catherine Ashton said sanctions might also target Iran’s central bank. German Foreign Minister Guido Westerwelle said the steps are aimed at “drying up funding” for Iran’s nuclear research.
“Europe is now preparing to sanction those parts of the Iranian economy where it will hurt: oil and finance,” Jan Techau, director of the Brussels-based European Center of the Carnegie Endowment for International Peace, said in an interview. “Europeans are united on this and it is this unity that seems to impress Iran.”
The U.S. and Europe have raised pressure on Iran this month after the International Atomic Energy Agency, the United Nations atomic watchdog, said Iran had started enriching uranium up to 20 percent at a fortified site. President Barack Obama signed a bill on Dec. 31 that tightens sanctions on Iran by denying access to the U.S. financial system to any foreign bank that conducts business with the Central Bank of Iran.
Swedish Foreign Minister Carl Bildt said that sanctions alone are “not the answer.” Bildt, speaking to reporters before the meeting in Brussels today, said the EU needs to seek “diplomatic engagement” with the Iranian leadership.
The U.S. and EU say Iran’s nuclear-development plans are aimed at building atomic weapons. The Islamic republic, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, is already under four rounds of UN sanctions and says its nuclear program is for energy and medical purposes, not weaponry.
An EU ban would apply to imports of Iranian oil, purchases out of Iran by EU companies to non-EU countries, transport of oil from Iran, as well as finance and insurance of oil contracts, according to an EU diplomat who declined to be identified, because the talks are confidential. The embargo requires unanimity among the bloc’s 27 states.