European Union approves new sanctions against Iran

BRUSSELS, Belgium—EU nations approved new sanctions against Iran on Monday, imposing additional financial and travel restrictions on a list of Iranian companies and experts -- including the country's largest bank.

But don't expect the EU, China, Russia or the U.S. to agree anytime soon to tougher sanctions that would ban oil and gas exports from Tehran in response to its nuclear program plans.

European Union officials stressed the importance of the 27-nation bloc's "carrot and stick" approach, which Europeans feel Western powers should continue as they try to sway Iran from plans to build nuclear weapons.

They acknowledged that any agreement on harsher energy sanctions, which could further push up energy prices, would be hard to reach, both within the bloc and with powers like China or Russia.

"Given the EU's thirst for oil and gas that would be sort of cutting of your nose to spite your face. Also given the surge in Russia, China and India (of energy demand) I think this would be a very tricky subject," said Shada Islam, an analyst at the European Policy Center, a Brussels-based think tank.

She said there was little appetite for energy sanctions, especially from Germany and France, both of which have energy deals with Iran.

However, French President Nicolas Sarkozy said the EU is concerned about Iran's nuclear program and told Israeli lawmakers that a nuclear-armed Iran is "unacceptable." He said Monday's approval of new sanctions was meant to send another reminder to Tehran that it should pursue negotiations.

Western nations fear Iran's uranium enrichment program could be used to make a nuclear bomb. Iran has vowed to push ahead with the enrichment work, saying it's intended to produce fuel for nuclear reactors that would generate electricity.

The sanctions, almost a year in the making by EU experts, were considered unlikely to deter Iranian President Mahmoud Ahmadinejad from pursuing his country's uranium enrichment plan, a key demand made by Washington, EU capitals, Moscow and Beijing.

But he was still mulling a return to talks with EU and other international officials over the nuclear program.

The EU's foreign policy chief, Javier Solana, held unsuccessful talks with officials in Tehran last week -- the latest diplomatic overture aimed at convincing Iran to accept an offer of economic incentives in return for an end to its uranium enrichment program. Solana presented the package on behalf of the permanent members of the U.N. Security Council and Germany.

On Monday, Mohammad Ali Hosseini, an Iranian Foreign Ministry spokesman, responded to the incentive package, saying that suspending uranium enrichment would be "illogical."

He acknowledged, however, there were commonalities that could provide a basis for future talks.

"We believe the common ground is encouraging," he said, without elaborating.

Prior to Monday's action, the EU had imposed a travel ban on some 20 Iranian citizens and 15 companies, as mandated by sanctions passed by the United Nations.

The new measures will take effect Tuesday, when the expanded blacklist of companies and "very senior experts" is published in the EU's official legal register, the Official Journal.

The EU action also forces the shutdown of the Bank of Melli's branches in Paris and Hamburg and a unit in London called Melli Bank PLC.

Officials at EU headquarters said they had evidence the bank was involved in business deals related to Iran's nuclear program, but refused to go into details.

An EU diplomat close to the issue said Italy had held up approval of the latest sanctions over concerns they might further disrupt efforts at a negotiated settlement.

The diplomat added there was little appetite now among EU nations for oil and gas sanctions despite strong U.S. pressure. He said such discussions were unlikely to begin until November, because of the need to study the implications for the West and for Iran.

He said preliminary debates on tougher energy sanctions also received an icy reception in China and Russia.

He spoke on condition of anonymity because of the sensitivity of ongoing talks behind closed doors.

In Tehran, independent analyst Saeed Laylaz said the freezing of Bank Melli's assets would lead to the Iranian economy becoming more isolated and more dependent on Chinese products.

But he suggested President Mahmoud Ahmadinejad might stand to benefit. Targeting Iran "drives inflation up," Laylaz said, "but it helps Ahmadinejad's government hide its failures behind the sanction."

Monday's sanctions were formally adopted without debate at the beginning of EU talks in Luxembourg. EU leaders agreed on the measure at talks in Brussels on Friday.

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Associated Press writer Nasser Karimi in Tehran contributed to this report.