European Union governments agreed on Monday to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, a move to put pressure on Tehran's disputed nuclear programme by shutting off its main source of foreign income.
However, to protect Europe's economy as it battles to overcome a debilitating debt crisis, the governments agreed to phase in the embargo, giving countries with existing contracts with Iran until July 1, 2012 to end those deals.
At a meeting of foreign ministers in Brussels, EU governments also agreed to freeze the assets of Iran's central bank and to ban all trade in gold and other precious metals with the bank and other public bodies, EU officials said.
Western powers hope the far stricter sanctions net, which brings the EU more closely into line with U.S. policy, will force Iran to scale back or halt its nuclear work, which Europe and the United States believe is aimed at developing weapons. Iran says it is enriching uranium solely for peaceful purposes.
EU foreign policy chief Catherine Ashton said she wanted financial sanctions to persuade Tehran to return to negotiations with the West, which she represents in talks with Iran.
I want the pressure of these sanctions to result in negotiations, she told reporters before the ministers met.
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, she said.
Tehran says its nuclear programme is necessary to meet its rising energy needs, but the United Nations' International Atomic Energy Agency said last year it had evidence that suggested Iran had worked on designing a nuclear weapon.
EU sanctions follow fresh financial measures signed into law by U.S. President Barack Obama on New Year's Eve and mainly targeting the oil sector, which accounts for some 90 percent of Iranian exports to the EU. The European Union is Iran's largest oil customer after China.
Economic considerations weighed heavily on EU preparations for the embargo in recent weeks because of the heavy dependence of some EU states on Iranian crude. Greece, which is at the heart of the debt crisis, is almost entirely dependent on Iranian oil. It must now seek alternative sources.
Diplomats will return to the issue of oil sanctions before May, officials said, to assess whether the measures are effective and whether EU states are succeeding in finding sufficient alternative resources.
Saudi Arabia, Kuwait and other oil-rich states in the Gulf are expected to increase their output of crude oil to offset the loss of access to Iranian exports.
There will be a review of the embargo before May, one EU official said. The review could potentially affect the date when the full ban takes effect, diplomats said.
Greece, which depends on financial help from the EU and the International Monetary Fund to stay afloat, gets nearly a quarter of its oil from Iran, thanks to favourable financing terms from Tehran.
The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution, a senior EU official told reporters on Friday.
With a significant part of EU purchases of Iranian oil covered by long-term contracts, the grace period will be an important factor in the effectiveness of the EU measures.
The unprecedented effort to take Iran's 2.6 million barrels of oil per day of exports 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 Adrian Croft in London and Sebastian Moffett in Brussels; Editing by Luke Baker and)