Iranian oil, gold and banks on EU hitlist

The big outstanding issue is how Greece, Italy and Spain can switch from buying oil from Iran to Saudi Arabia and the United Arab Emirates without losing money. Another problem is how to make sure EU trade in things like food and textiles can keep going if the Union blacklists the Central Bank of the Islamic Republic.

Greece buys almost half its oil from Iran on soft credit terms and wanted the embargo to be put off for "at least" one year.

France - which is leading the push for sanctions together with Germany and the UK - wants a time lag of just a few months. The Danish EU presidency and the European External Action Service have proposed 1 July as a compromise.

"A number of Gulf countries have already said they are ready to provide more supply on international markets. But it's a question of having time to make specific new contracts so that there is no disturbance of supply ... Libyan oil supply is also increasing," an EU diplomat familiar with Greek thinking said.

"At the end of the day it will be Greek companies which have to sign new contracts with Saudi Arabia, as they did with Iran," another EU diplomat noted.

The central bank is also to go on the blacklist along with one more Iranian bank.

"We are trying to find ways for the EU to be able to go on with other parts of trade which involve the central bank, which handles currency transactions," a third EU diplomat noted. He added that trade in gold, diamonds and other precious minerals could be stopped in a new proposal that surfaced on Wednesday.

A source familiar with the draft statement to be published by EU ministers said it will focus on Iran's alleged nuclear weapons programme and leave out the usual complaints on human rights and democracy.

"It voices concerns about the nuclear programme and it calls on Iran to return to talks with the P5+1. It maintains our offer to hold talks under the twin-track approach, but with no pre-conditions," the source explained, referring to the international group - China, France, Germany, Russia, the UK and the US - trying to get Iran to fall in line with UN demands.

Meanwhile, neighbouring powers - Israel and Turkey - are already positioning themselves for the oil embargo.

Israeli foreign ministry spokesman Ygal Palmor told EUobserver on Wednesday: "What we would like to see are ... crippling sanctions on Iran such as will convince its government to stop a race toward a nuclear bomb." He added that Iran's threat to impose a military blockade on Saudi exports through the Strait of Hormuz are "a sign of Iranian weakness in the face of international pressure."

For his part, Turkish foreign ministry spokesman Selchuk Unal noted that his country - which imports Iranian oil for re-export as petrol - is only bound to follow UN-level, not EU-level sanctions.

Turkish foreign minister Ahmet Davutoglu was to join EU ministers in Brussels on Monday. But he might now stay in Ankara if the French upper house votes on a bill criminalising Armenian genocide denial the same day.

Turkey also has doubts EU countries will fully implement the new measures, after a Russian boat allegedly carrying several tonnes of ammunition last week refueled in Cyprus and landed in Syria in violation of an EU arms ban.