The European Union banned imports of oil from Iran on Monday and imposed a number of other economic sanctions, joining the United States in a new round of measures aimed at deflecting Tehran's nuclear development programme.
In Iran, one politician responded by renewing a threat to blockade the Strait of Hormuz, an oil export route vital to the global economy, and another said Tehran should cut off crude shipments to the EU immediately.
That might hurt Greece, Italy and other ailing economies which depend heavily on Iranian oil and, as a result, won as part of the EU agreement a grace period until July 1 before the embargo takes full effect. Angry words on either side helped nudge benchmark Brent oil futures above $110 a barrel on Monday.
A day after a U.S. aircraft carrier, accompanied by a flotilla that included French and British warships, made a symbolically loaded voyage into the Gulf in defiance of Iranian hostility, the widely expected EU sanctions move is likely to set off yet more bellicose rhetoric in an already tense region.
Some analysts say Iran, which denies accusations that it is seeking nuclear weapons, could be in a position to make them next year. So, with Israel warning it could use force to prevent that happening, the row over Tehran's plans is an increasingly pressing challenge for world leaders, not least U.S. President Barack Obama as he campaigns for re-election in November.
Israeli Prime Minister Benjamin Netanyahu, who has voiced scepticism about the chances of Iran being persuaded by non-military tactics, called the EU sanctions a step in the right direction but said Iran was still developing atomic weapons.
Israel, assumed to have the only nuclear arsenal in the Middle East, views the Iranian nuclear programme as a threat to its survival.
Meeting in Brussels, foreign ministers from the 27-state EU, which as a bloc is Iran's second biggest customer for crude after China, agreed to an immediate ban on all new contracts to import, purchase or transport Iranian crude oil and petroleum products. However, EU countries with existing contracts to buy oil and petroleum products can honour them up to July 1.
EU officials said they also agreed to freeze the assets of Iran's central bank and ban trade in gold and other precious metals with the bank and state bodies.
Along with U.S. sanctions imposed by Obama on December 31, the Western powers hope that choking exports and hence revenue can force Iran's leaders to agree to curbs on a nuclear programme the West says is intended to yield weapons.
EU SEEKS TALKS
The United Nations' nuclear watchdog, the International Atomic Energy Agency, confirmed plans for a visit next week by senior inspectors to try and clear up suspicions raised about the purpose of Iran's nuclear activities. Tehran is banned by international treaty from developing nuclear weaponry.
The Agency team is going to Iran in a constructive spirit, and we trust that Iran will work with us in that same spirit, IAEA chief Yukiya Amano said in a statement announcing the December 29-31 visit. The overall objective of the IAEA is to resolve all outstanding substantive issues.
EU foreign policy chief Catherine Ashton said of the new sanctions: I want the pressure of these sanctions to result in negotiations ... I want to see Iran come back to the table and either pick up all the ideas that we left on the table ... last year ... or to come forward with its own ideas.
Iran has said lately that it is willing to hold talks with Western powers, though there have been mixed signals on whether conditions imposed by either side make new negotiations likely.
The Islamic Republic insists it is enriching uranium only for electricity and other civilian uses.
It has powerful defenders against the Western action in the form of Russia and China, which argue that the new sanctions are unnecessary, and can also probably count on China and other Asian countries to go on buying much of its oil, despite U.S. and European efforts to dissuade them.
Russia Foreign Minister Sergei Lavrov, classifying the EU embargo among aggravating factors, said Moscow believed there was a good chance that talks between the six global powers and Iran could resume soon and that Russia would try to steer both Iran and the West away from further confrontation.
A member of Iran's influential Assembly of Experts, former intelligence minister Ali Fallahian, said Tehran should respond to the delayed-action EU sanctions by stopping sales to the bloc immediately, denying the Europeans time to arrange alternative supplies and damaging their economies with higher oil prices.
The best way is to stop exporting oil ourselves before the end of this six months and before the implementation of the plan, the semi-official Fars news agency quoted him as saying.
He reiterated that Iran could close the Strait of Hormuz, the narrow channel between the Gulf and open sea through which a third of all oil tanker traffic passes to importers around the world.
Washington has said it will not tolerate any closure, a position underlined by Sunday's passage through the strait of a U.S. flotilla around the carrier Abraham Lincoln, accompanied by two European frigates, Britain's Argyll and France's La Motte-Picquet.
While Iran's Revolutionary Guards, possibly aware of the warships' impending arrival, had backed away on Saturday from a threat made by a vice president last month to prevent even one drop of oil passing through the strait if the West embargoed Iran's crude, a senior member of parliament said on Monday that the closure remained an option if exports were disrupted.
If any disruption happens regarding the sale of Iranian oil, the Strait of Hormuz will definitely be closed, Mohammad Kossari, deputy head of parliament's foreign affairs and national security committee, told Fars.
Going further, he referred to previous U.S. warnings that it would use force to break any Iranian blockade of the channel and threatened wider violence against Washington's global interests.
If America seeks adventures after the closure of the Strait of Hormuz, Iran will make the world unsafe for Americans in the shortest possible time, Kossari said.
It is in America's interests to accept a powerful Iran and not seek military adventures.
While the Western powers were at pains to describe their naval movement through the strait as routine, a view echoed by the Revolutionary Guards, they also stressed its symbolism.
On this occasion HMS Argyll and a French vessel joined a U.S. carrier group transiting through the Strait of Hormuz, to underline the unwavering international commitment to maintaining rights of passage under international law, Britain's defence ministry said in a statement.
In Paris, spokesman Thierry Burkhard said: It's a sign to Iran if they want to consider it like that.
Iran, the world's No. 5 oil exporter and also rich in natural gas, says it is refining uranium and developing other nuclear technologies to meet rising energy needs. But the U.N. nuclear watchdog agency reported in November that it had evidence suggesting Iran had worked on designing an atomic bomb.
The unprecedented effort to take Iran's 2.6 million barrels of oil per day off international markets has kept global prices high, pushed down Iran's rial currency and caused a surge in the cost of basic goods for Iranians.
(Additional reporting by Robin Pomeroy and Mitra Amiri in Tehran, David Brunnstrom in Brussels, Adrian Croft in London, John Irish in Paris, Alexei Anishchuk in Sochi, Ari Rabinovitch and Jeffrey Heller in Jerusalem and Fredrik Dahl in Vienna; Writing by Alastair Macdonald; Editing by Mark Heinrich)