WRAPUP 2-EU toughens sanctions on Iran; Tehran offers talks

* EU foreign ministers target Iranian oil, gas investment

* Iran says ready to return to negotiations on fuel swap

* Gasoline imports to Iran fall as sanctions tighten

(Adds Ashton reaction to Iran offer, paragraph 6)

By Luke Baker and Robin Pomeroy

BRUSSELS/TEHRAN, July 26 (BestGrowthStock) – Iran said on Monday it
was ready to return to talks on a nuclear fuel swap, a surprise
that came shortly after the European Union agreed tougher
sanctions, including a block on oil and gas investment.

EU foreign ministers approved a range of extra restrictions
on Iran that went well beyond U.N. sanctions agreed last month
and included a ban on dealing with Iranian banks and insurance
companies and steps to prevent investment in Tehran’s lucrative
oil and gas sector, including refining.

Shortly afterwards, Iran said it was prepared to return to
negotiations on a nuclear fuel swap “without conditions”,
according to the official IRNA news agency.

Talking of a letter that Iran handed to the International
Atomic Energy Agency (IAEA), Iran’s envoy to the U.N. agency,
Ali Asghar Soltanieh, said: “The clear message of this letter
was Iran’s complete readiness to hold negotiations over the fuel
for the Tehran reactor without any conditions.”

The announcement appeared to be an Iranian signal of
willingness to negotiate as a net of U.N., EU and U.S. sanctions
tightens around it, but it was not clear that the quick offer of
fuel swap talks would be enough to placate world powers.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a factbox on some of the measures, double click on
[ID:nLDE66D0Y3]
For a timeline, double click on [ID:nLDE66P1QJ]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

EU foreign affairs chief Catherine Ashton welcomed Iran’s
offer of a return to negotiations but said she wanted to see the
details before commenting further.

Turkey and Brazil agreed a nuclear fuel swap deal with
Tehran days before the U.N. agreed more sanctions in mid-June,
but this did not stop the major powers — the United States,
Britain, France, Germany, China and Russia — from pushing ahead
with a stringent, fourth round of restrictions on Iran.

The European Union said on Monday that the aim of its latest
sanctions was to get Iran to return to negotiations over its
uranium enrichment programme, possibly by the end of the year.

Ashton and Iran’s chief nuclear negotiator, Saeed Jalili,
have exchanged several letters in the past month and EU
diplomats say they could hold talks as soon as September.

Iran last negotiated with the West over its nuclear
programme in October 2009 but there was no breakthrough.

The question is whether Iran will agree that new talks can
look at the possibility of stopping its enrichment programme —
which Western powers believe is aimed at developing nuclear
weapons — or whether it will try to focus them on a fuel swap,
without any commitment to halting uranium enrichment.

Iran says its nuclear programme is for peaceful purposes
only, with medical and energy applications, not for weapons.

EU TAKES EXTRA STEPS

The EU restrictions, expected legally to come into force on
Tuesday, focus on preventing oil and gas investment, stopping
dealings with Iranian banks and insurance companies, and
stemming financial transfers.

“The longer (Iran) refuses to talk … about its nuclear
programme, the greater the pressure and isolation Iran will
bring on itself,” British Foreign Secretary William Hague said.

“But Iran does have a choice: Britain and the international
community stand ready to engage, and still believe that the way
forward on this issue is multilateral negotiation.”

Perhaps the hardest-hitting element of the sanctions is the
move to prohibit new investment in and technical assistance to
Iran’s refining, liquefaction and liquefied natural gas sectors
which are a mainstay of its energy-based economy.

There is a broad clampdown on the “supply, sale or transfer
of items, materials, equipment, goods and technology” that could
have “dual-use” purposes, including software, and restrictions
on financial transfers and bond sales or purchases.

PRESSURE AND DIPLOMACY

The broadened sanctions are intended to put financial
pressure on Iran, which is the world’s fifth largest crude oil
exporter but has little refining capacity and has to import
about 40 percent of its gasoline needs for domestic consumption.

Traders said this month Iran was depending more on friendly
countries for fuel supplies to sidestep sanctions intended to
hinder its fuel imports, and was buying about half of its July
gasoline imports from Turkey and the rest from Chinese sellers.

Only three cargoes of gasoline have so far reached Iran this
month, according to shipping documents seen by Reuters, a sign
that sanctions are biting. Because Iran subsidises fuel for
consumers, pump prices will not be affected. [ID:nLDE66P1GA]

While China, Turkey, Malaysia and others may now step in to
furnish Iran with goods it will no longer be able to get from
the European Union, analysts said the EU sanctions were
well-enough designed to ensure they would be effective.

“Most of the sectors that have been targeted in the EU
sanctions are ones over which Europeans have a substantial
leverage,” Mark Fitzpatrick, an Iran specialist at the
International Institute for Strategic Studies, told Reuters.

“Not so many other countries can provide the kind of
financial services that will be cut off. Few other countries
supply technology for liquefied natural gas, nobody else does
re-insurance … The European Union has very wisely found areas
over which it has real leverage and cannot be supplanted.”

Stock Market Analysis

(Additional reporting by David Brunnstrom and Justyna Pawlak in
Brussels, Amena Bakr in Dubai and Luke Pachymuthu in Singapore;
Editing by Tim Pearce)

WRAPUP 2-EU toughens sanctions on Iran; Tehran offers talks