EU agrees ban on Iranian oil importsWednesday 04 January 2012 20.50
European governments have agreed in principle to ban imports of Iranian oil.
The prospective embargo by the European Union, along with tough US financial measures signed into law by President Barack Obama on New Year's Eve, form a concerted Western campaign to hold back Iran's nuclear programme.
Iran says the programme is strictly non-military, but Western countries say a November UN report shows it has sought to build an atomic bomb. Talks between Tehran and major powers broke down a year ago.
Diplomats said EU envoys held talks on Iran in the last days of December, and that any objections to an oil embargo had been dropped, notably from Greece, which gets a third of its oil from Iran. Spain and Italy are also big buyers.
US State Department spokeswoman Victoria Nuland called the EU moves "the kinds of steps that we would like to see not just from our close allies and partners in places like Europe but from countries around the world".
A US Treasury official said Tehran's oil revenues could be choked off without disrupting global oil markets.
Treasury Secretary Timothy Geithner will travel to China and Japan next week to discuss US sanctions on Iran and the state of the global economy.
The embargo will force Tehran to find other buyers for oil.
EU countries buy about 450,000 barrels per day (bpd) of Iran's 2.6m bpd in exports, making the union collectively the second largest market for Iranian crude after China.
The news caused a spike rise in oil prices, with Brent crude peaking at nearly $114 a barrel in intraday trading, up nearly $2 from Tuesday's close.
Western countries have imposed various sanctions on Iran for years with little impact.
But the latest measures are qualitatively different, directly targeting Iran's oil industry, which forms 60% of its economy.
Most traders expect Iran will still find buyers for its crude, mostly in Asia, but it is going to have to offer substantial discounts, cutting back the revenue that the state relies on to subsidise basic goods for its citizens.
Tougher sanctions appear to be having an impact already on Iran's streets, where prices for foodstuffs are soaring.
The rial currency has lost 40% of its value against the dollar over the past month.
Currency exchanges have shut in Tehran and Iranians have queued to withdraw their savings from banks and buy dollars.