The European Union (EU) approved an embargo on Iranian oil imports at a meeting of EU foreign ministers in Brussels.
The sanctions ban all new oil contracts with Iran and freeze the assets of Iran's central bank in the EU. The sanctions will be effective from 1 July 2012.
The EU will freeze assets in Europe of the Iranian central bank as well as of eight other entities and ban trade in gold, precious metals, diamonds and petrochemical products from Iran.
Iran had "failed to restore international confidence in the exclusively peaceful nature of its nuclear programme", British Prime Minister David Cameron, French President Nicolas Sarkozy and German Chancellor Angela Merkel said in a joint statement.
US President Barack Obama has welcomed the EU sanctions, saying they show international unity against the "serious threat" posed by Iran's nuclear programme.
Iran has said an oil embargo adopted by European Union foreign ministers over the country's nuclear programme is "unfair" and "doomed to fail".
The EU currently buys about 20 per cent of Iran's oil exports. The EU imported US$18.9 billion of goods from Iran, 90 per cent of which was oil and related products.
Oil sales earned Iran US$73 billion in 2010 and supplied more than 50 per cent of the national budget and 80 percent of exports, according to the US Energy Department and the International Monetary Fund.
Fitch Ratings has said in a newly-published report that the embargo on Iranian oil imports to the EU will increase geopolitical risk in the Middle East region supporting high oil prices.
"Fitch believes that the EU ban on Iranian oil is largely credit neutral for EU integrated oil and gas companies," said Arkadiusz Wicik, Director in Fitch's European Energy, Utilities and Regulation team. "The cash flow impact of the ban may be negative for refining operations, but should be positive or neutral for upstream operations."
