The storming of the British embassy compound in Tehran provides extra ammunition to European governments pushing for stronger sanctions against Iran, in particular a contentious embargo on Iranian oil, diplomats said on Wednesday.
EU foreign ministers meet in Brussels on Thursday to map out Europe's response to a report by the International Atomic Energy Agency in recent weeks that suggested Iran has worked on designing an atom bomb.
Much has already been agreed -- the EU will add some 180 names to a list of people and entities targeted by pan-European sanctions -- but a number of EU capitals have yet to decide exactly how much economic pressure the EU should apply on Iran over its nuclear programme, which it says is peaceful.
Tuesday's attack on the British embassy by dozens of students and protesters angry over Britain's unilateral sanctions could go some way towards convincing them stronger action is needed, diplomats said.
From a political point of view this (attack) cannot, I think, work in the direction of EU member states wanting to ease pressure on Iran, one senior EU diplomat said. On the contrary.
The whole question is do we go further and add a new set of sanctions apart from those adopted in the past.
French Foreign Ministry spokesman Bernard Valero said that following the embassy attack, Paris would push foreign ministers in Brussels to look at sanctions beyond what had already been agreed, especially proposals made by President Nicolas Sarkozy to freeze the central bank's assets and to ban oil imports.
French sources say that Paris feels the attack has added to the already long list of factors playing against Tehran and those that have wavered will be more inclined to listen to the French proposals.
Britain plans to back the idea of banning Iranian oil imports to Europe, diplomats have said, but resistance elsewhere in the EU remains.
In the past week, some EU capitals have insisted it is too early to adopt the embargo and ban European companies from doing business with the central bank, concerned about the economic consequences of tighter restrictions on a big OPEC oil producer.
Experts say a European embargo could boost global crude prices at a time when Europe is teetering on the brink of recession and struggling with a mounting debt crisis.
Greece, in particular, has expressed reluctance, EU diplomats say. Traders say debt-strapped Athens has been relying on Iranian oil, which comes with an attractive financing offer at a time when banks are increasingly denying it credit.
Diplomats said foreign ministers might not be able to reach an agreement on any oil embargo yet, but discussions could be finalised next week, when EU heads of state meet for a summit on December 8 and 9.
In addition to discussing sanctions, EU governments are expected to issue a stern warning to Tehran on Thursday over the attack on Britain's interests, expressing their outrage, EU officials said, using a word seldom used in diplomat communiques.
The next step could be a concerted move to recall EU envoys from Tehran in a show of solidarity with London that, combined with sanctions, would be a strong signal to Tehran that Europe is serious about pushing for change, experts say.
The takeover of the UK embassy changes the perspective, said Bruno Tertrais, a senior research fellow at France's Strategic Research Foundation think tank.
It will be increasingly harder for those in the EU who argue for a softer approach to push ... Their voices will be increasingly difficult to be heard, he said. It will show Iran that it cannot divide the EU.
Britain has shut the Iranian embassy in London and closed its own embassy in Tehran, in a move followed by France and Germany which recalled their own envoys from Tehran on Wednesday.
Tehran has denied its nuclear work is aimed at building bombs and says it needs it to generate extra power to feed a growing demand for energy and for medical research purposes.
But the IAEA report appeared to offer evidence backing up Western concerns, prompting a wave of unilateral sanctions from the United States, Canada and Britain, announced this month.
The United States has taken steps designed to dissuade non-U.S. banks from dealing with Iran. Washington blacklisted 11 entities suspected of aiding Iran's nuclear programs, and expanded sanctions to target companies that aid its oil industry.
Britain banned all its financial institutions from doing business with Iran, including the Iranian central bank, and Canada said it would ban the export of all goods used in Iran's petrochemical, oil and gas industries and block virtually all transactions with Iran, also including with the central bank.
(Additional reporting by John Irish in Paris Editing by Maria Golovnina)