EU toughens sanctions on Iran as Tehran offers talks

Iran said on Monday it was ready to return to talks on a nuclear fuel swap, a surprise that came shortly after the European Union agreed tougher sanctions, including a block on oil and gas investment.

EU foreign ministers approved a range of extra restrictions on Iran that went well beyond U.N. sanctions agreed last month and included a ban on dealing with Iranian banks and insurance companies and steps to prevent investment in Tehran's lucrative oil and gas sector, including refining.

Shortly afterwards, Iran said it was prepared to return to negotiations on a nuclear fuel swap "without conditions," according to the official IRNA news agency.

Talking of a letter that Iran handed to the International Atomic Energy Agency (IAEA), Iran's envoy to the U.N. agency, Ali Asghar Soltanieh, said: "The clear message of this letter was Iran's complete readiness to hold negotiations over the fuel for the Tehran reactor without any conditions."

The announcement appeared to be an Iranian signal of willingness to negotiate as a net of U.N., EU and U.S. sanctions tightens around it, but it was not clear that the quick offer of fuel swap talks would be enough to placate world powers.

EU foreign affairs chief Catherine Ashton welcomed Iran's offer of a return to negotiations but said she wanted to see the details before commenting further.

Turkey and Brazil agreed a nuclear fuel swap deal with Tehran days before the U.N. agreed more sanctions in mid-June, but this did not stop the major powers -- the United States, Britain, France, Germany, China and Russia -- from pushing ahead with a stringent, fourth round of restrictions on Iran.

The European Union said on Monday that the aim of its latest sanctions was to get Iran to return to negotiations over its uranium enrichment program, possibly by the end of the year.

Ashton and Iran's chief nuclear negotiator, Saeed Jalili, have exchanged several letters in the past month and EU diplomats say they could hold talks as soon as September.

Iran last negotiated with the West over its nuclear program in October 2009 but there was no breakthrough.

The question is whether Iran will agree that new talks can look at the possibility of stopping its enrichment program -- which Western powers believe is aimed at developing nuclear weapons -- or whether it will try to focus them on a fuel swap, without any commitment to halting uranium enrichment.

Iran says its nuclear program is for peaceful purposes only, with medical and energy applications, not for weapons.

EU TAKES EXTRA STEPS

The EU restrictions, expected legally to come into force on Tuesday, focus on preventing oil and gas investment, stopping dealings with Iranian banks and insurance companies, and stemming financial transfers.

"The longer (Iran) refuses to talk ... about its nuclear program, the greater the pressure and isolation Iran will bring on itself," British Foreign Secretary William Hague said.

"But Iran does have a choice: Britain and the international community stand ready to engage, and still believe that the way forward on this issue is multilateral negotiation."

Perhaps the hardest-hitting element of the sanctions is the move to prohibit new investment in and technical assistance to Iran's refining, liquefaction and liquefied natural gas sectors which are a mainstay of its energy-based economy.

There is a broad clampdown on the "supply, sale or transfer of items, materials, equipment, goods and technology" that could have "dual-use" purposes, including software, and restrictions on financial transfers and bond sales or purchases.

PRESSURE AND DIPLOMACY

The broadened sanctions are intended to put financial pressure on Iran, which is the world's fifth largest crude oil exporter but has little refining capacity and has to import about 40 percent of its gasoline needs for domestic consumption.

Traders said this month Iran was depending more on friendly countries for fuel supplies to sidestep sanctions intended to hinder its fuel imports, and was buying about half of its July gasoline imports from Turkey and the rest from Chinese sellers.

Only three cargoes of gasoline have so far reached Iran this month, according to shipping documents seen by Reuters, a sign that sanctions are biting. Because Iran subsidizes fuel for consumers, pump prices will not be affected.

While China, Turkey, Malaysia and others may now step in to furnish Iran with goods it will no longer be able to get from the European Union, analysts said the EU sanctions were well-enough designed to ensure they would be effective.

"Most of the sectors that have been targeted in the EU sanctions are ones over which Europeans have a substantial leverage," Mark Fitzpatrick, an Iran specialist at the International Institute for Strategic Studies, told Reuters.

"Not so many other countries can provide the kind of financial services that will be cut off. Few other countries supply technology for liquefied natural gas, nobody else does re-insurance ... The European Union has very wisely found areas over which it has real leverage and cannot be supplanted."

Source http://www.reuters.com/article/idUSTRE66P2M420100727