By CLARE HUTCHISON
The 27-nation European Union agreed on Monday to block all crude-oil imports from Iran, as it steps up pressure on the Gulf nation to scale back its nuclear-enrichment program.
Following a meeting of EU foreign ministers in Brussels, the European Council said it has banned imports of Iranian crude oil and petroleum products, though existing oil contracts can be honored until July 1.
The embargo also applies to imports of petrochemical products from Iran and forbids supplying the country with technology or funds for use in this sector.
The Council also agreed to freeze assets of the Iranian central bank within the EU.
"Given the EU's serious and deepening concerns over the Iranian nuclear program, the Council today broadened the EU's restrictive measures against that country," it said in a statement. "Today's decisions target the sources of finance for the nuclear program, complementing already existing sanctions."
The boycott will squeeze Iran's wider economy, as oil exports account for half the government's revenue. The EU is the second-largest customer of Iranian oil after China, buying around one-fifth of Iran's oil exports.
EU and US officials have also been appealing to Asian countries to join the boycott.
Earlier on Monday, the EU's foreign policy chief, Catherine Ashton, said "the pressure of sanctions is designed to try and make sure that Iran takes seriously our request to come to the table and meet."
Arriving at the meeting of the Council, British Foreign Secretary William Hague said Iran "continues to defy United Nations sanctions" with its nuclear program and that it is very important to "increase peaceful and legitimate pressure on the Iranian government to enter into meaningful negotiations with the international community."
Iranian authorities have denied the Gulf nation is making nuclear weapons, saying the purpose of program is to provide energy for its citizens.
However, a report by the International Atomic Energy Agency published in November said Iran had carried out "activities relevant to the development of a nuclear explosive device."
Before the ban was official, Tehran issued retaliatory threats to shut off the Strait of Hormuz, a sea passage on Iran's southeast coast through which 20% of the world's oil exports flow.
The confrontation has pushed global oil prices higher in recent weeks. Crude-oil futures for February delivery were up 0.8% to $99.09 a barrel on Monday.
Ahead of the embargo announcement, Commerzbank analysts said the gradual nature of the ban should limit extreme fluctuations in oil prices.
The import ban "will be implemented gradually over a period of several months, which should dampen its inflationary effect on the oil price," the analysts said in a note.
Commerzbank said the ban is worrying, however, as it comes amid uncertainty about the oil supply from South Sudan. The country has threatened to cut supply because its neighbor to the north, Sudan, has been siphoning off large amounts of its oil through the pipeline network that goes through each country.
"Any prolonged discontinuation of South Sudan's oil production, in combination with the partial shortfall in Iranian oil exports, could lead to a tightening of supply on the oil market and cause prices to rise still further," Commerzbank said.
Dow Jones Newswires