EU poised to agree ban on Iranian gas imports

By Justyna Pawlak and Barbara Lewis

BRUSSELS (Reuters) - The European Union is poised to ban imports of Iranian gas as part of a set of new measures to ratchet up pressure on the Islamic Republic over its nuclear programme, diplomats said on Thursday.

Diplomats from EU member states have started preparing a package of sanctions against Iran with a goal of formally adopting them at a meeting of foreign ministers on October 15 in Luxembourg.

Late on Wednesday, they reached a preliminary deal to ban gas imports, the first measure to win approval in the package, which also consists of various finance and energy-related proposals, three EU diplomats said.

"There is agreement on gas," one of the diplomats said, speaking on condition of anonymity. "The big states back it, Germany, Britain, France," another one said.

European governments and the United States are searching for fresh ways to pressure Tehran into scaling back its nuclear programme after diplomacy foundered earlier this year. Tehran denies its work has any military intentions.

Tensions over the issue are rising, with Israel - widely thought to be the only power in the Middle East with nuclear weapons - threatening to strike Iranian uranium enrichment installations.

The United States, since 1995, has banned U.S. firms from investing in Iranian oil and gas and from trading with Iran. Last December it adopted steps that prompted buyers in Japan, South Korea and India to cut Iranian oil purchases and in July it announced sanctions against foreign banks helping Tehran sell oil.

The European Union has been much slower to target Iranian energy. It imposed an embargo on Iranian oil this year, after banning the creation of joint ventures with enterprises in Iran engaged in the oil and natural gas industries in 2010.

Existing sanctions cover investment in Iranian gas, but do not specifically outlaw imports, which are insignificant in terms of volume but have a symbolic importance.

The EU sources said any Iranian gas that reaches Europe comes via Turkey, which blends it with Azeri gas and ships it on.

DEBATE OVER GREECE AND BULGARIA

Greece and Bulgaria are the two EU nations in prime position to receive gas via Turkey for now and one diplomat said details still had to be decided on how they might be affected.

"The modalities are still to be worked out," he said.

Analysts and industry sources said it would be virtually impossible to identify the quantities involved.

"You might have a situation in which physically, an Iranian gas molecule gets to Europe," one industry source said on condition of anonymity.

"But this is like inhaling an air molecule from the last gasp of (Roman Emperor) Julius Caesar, which due to the laws of volume, we all do from time to time."

The EU diplomats said there was a risk the bloc's plans to tighten sanctions could alienate Turkey, which has a pivotal role in the European Commission's aspirations to diversify gas supplies away from dominant supplier Russia, but it was a risk worth taking.

In any case, one of the sources said Turkey was likely to ignore the ban.

"There are two possibilities. Either Turkey goes with it or Turkey maintains imports silently," the source said.

Turkey controls a huge part of a planned new export route for shipping Azeri gas, which would link up with one of two pipelines short-listed to complete the journey into the EU.

A protracted territorial dispute between current EU president Cyprus and Turkey has soured ties between Ankara and the European Union, but one of the sources said relations could probably withstand a ban on Iranian gas.

"Relations between Turkey and Europe are not very good, but they're not very bad," he said.

(Additional reporting by Daniel Fineren in Dubai; Editing by James Jukwey and Anthony Barker)