The EU and the United States have implemented fresh sanctions against Iran targeting its oil exports. The tough measures are intended to curtail Iran’s nuclear program that Western nations believe is aimed at making nuclear weapons, while Iran claims that their nuclear program is for peaceful energy generation purposes instead.

The sanctions were met with an increasingly intense currency war as Iran and Russia plan to replace the U.S. Dollar with their own currencies for bilateral trade. The replacement of the U.S. Dollar for Iran’s trade with Russia was agreed upon after Iran had already replaced the Dollar in its oil transactions with India, China and Japan, according to the Iranian state run Fars news agency.

Making yet another case for holding gold and silver is that the European Union nations have been banned from trading in gold, silver, diamonds and petrochemical products with the Iranian central bank and with eight other entities to be named on January 26th.

EU Implements Iranian Oil Ban, Iran Threatens to Close Straight of Hormuz

Furthermore, on January 23rd, the European Union (EU) placed a ban on all new contracts to import, purchase or transport Iranian crude oil. The EU makes up Iran’s second largest oil purchaser after China.

According to Reuters, “EU countries with existing contracts for Iranian oil and petroleum products will have until July 1, 2012 to complete those contracts. The sanctions follow fresh financial measures signed into law by U.S. President Barack Obama on New Year’s Eve, and will mainly target the oil sector, which accounts for some 90 percent of Iranian exports to the EU.”

“Today’s decisions target the sources of the finance for the nuclear program, complementing already existing sanctions” the EU stated in Brussels on Wednesday, adding that the EU had already “banned imports of Iranian crude oil and petroleum products.”

Iran retaliated to the news of the EU sanctions, with a member of the Iranian parliament stating that Iran will “certainly close the Strait of Hormuz”. The highly strategic Strait of Hormuz is currently under Iranian control and handles roughly 20 percent of global crude oil transport.

Iran Central Bank Hikes Rates Over 20 Percent as Rial Plummets

Iranian President Mahmoud Ahmadinejad raised interest rates on Iranian bank deposits to up to 21 percent on January 23rd, according to the official Iranian news agency IRNA. Iran’s central bank also urged Iranians to buy U.S. Dollars only if they were traveling abroad and not to hoard them as a hedge against economic uncertainty.

The move by the Iranian central bank exacerbated the already steep plunge in the Iranian Rial, which has lost more than 50 percent of its value against the price of U.S. Dollars in the open market over the last month.

The ominous slide in the Rial began in April when the Iranian central bank decided to cut rates to a range of between 12.5 to 15.5 percent in April, prompting people to put their money in safe havens like precious metals and the U.S. Dollar. Inflation in Iran is currently running at 20 percent.