European Union foreign ministers Monday approved an oil embargo on Iran, moving past an internal debate over the economic burden on some members and sending a strong rebuke to the Islamic Republic over its nuclear program.
European Union foreign ministers Monday approved an oil embargo on Iran , moving past an internal debate over the economic burden on some members and sending a strong rebuke to the Islamic Republic over its nuclear program.

Citing "serious and deepening concerns," the EU agreed to impose a full embargo on Iranian oil, including existing contracts, by July 1. Other new sanctions targeted the Central Bank of Iran and Iranian petrochemical exports to the EU, according to a statement by the Council of the European Union.

The embargo comes as the U.S. and the EU exert unprecedented efforts to starve Iran from key oil revenues, amid growing fears the alleged Iran nuclear buildout could inflame Middle East relations.

While policy analysts have expressed skepticism at the utility of an oil embargo as a lever on Iran , few doubt the EU's move will cause major ripples in the oil market. Refiners in Spain and Italy have already begun to phase out some Iranian oil purchases in anticipation of the embargo and those efforts promise to increase as the July deadline approaches.

Although the embargo was largely in line with expectations, oil prices rose slightly at news the EU had agreed the policy. At 1428 GMT, the front-month March contract on the New York Mercantile Exchange was trading up 62 cents, or 0.6%, at $98.95 a barrel. The front-month March Brent contract on London 's ICE futures exchange was up 64 cents, or 0.6%, at $110.50 a barrel.

The Iranian rial tumbled to new record lows against the dollar Monday on the EU headlines, to around IRR20,500, Agence France-Presse reported.

There was no immediate reaction Monday from Iran , but an official acknowledged the policy will hinder the country's largest revenue stream.

"It will make things tougher at this end" by restricting the choice of crude buyers, an Iranian oil official said.

In an interview with the Fars news agency Monday, Fatemeh Alia, a member of the National Security and Foreign Policy Commission, said Iran "hasn't changed [its] stance" regarding the possibility of closing the Strait of Hormuz, a vital shipping lane through which passes one-third of the world's seaborne oil.

According to the International Energy Agency, the EU imports about 600,000 barrels of oil a day from Iran --close to a quarter of Tehran 's exports of 2.6 million barrels a day. But those imports fall unevenly, with many of Europe 's most stressed economies-- Greece , Italy and Spain --among the biggest customers.

In recent weeks, Greece emerged as the most skeptical EU member of the embargo, arguing that a slower implementation was needed to ensure that its economy wouldn't be excessively burdened.

Under Monday's agreement the EU said it will undertake a review of the policy's effects on member states by May 1, bowing to a condition sought by Greece . However, any move to reverse or delay the embargo would require a unanimous decision of the EU's 27 members, officials said, and Greece didn't win a special exemption giving it extra time beyond July 1 to implement the full embargo, a proposal it had made last week.

Diplomats said EU foreign ministers would promise to take all necessary measures to ensure all member states would continue to have access to oil supplies.

The sanctions represent the most-serious ratcheting up of EU pressure against Iran thus far over its nuclear program. France , which initially proposed the sanctions, is one of several member states that accuse Iran of seeking to develop nuclear weapons, a charge that Tehran denies.

The EU is yet to get a response to an October letter from its foreign policy chief Catherine Ashton to Iran 's chief nuclear negotiator Saeed Jalili, offering to resume talks.

Monday, the EU pledged to continue with its "dual track" approach--sanctioning Iran on the one hand, while remaining open to negotiations on the other. The EU move comes as top U.S. officials also apply pressure to China , India and other Asian countries to trim Iranian imports. Despite those diplomatic efforts, China and other countries continue to say they will import from Iran .

Joseph Nye, a Harvard University political scientist, said in a recent interview that the effectiveness of an oil embargo would be limited as long as Iran is still able to sell some oil on the international market. An additional risk is that an embargo could be trumped if Iran follows through on threats to close to the Strait of Hormuz , Nye said; that could cause oil prices to rise steeply and generate higher oil revenues for Iran .

An embargo will have "some effect, but whether it will have the effect policy makers want is an open question," said Nye.

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