EU to issue stronger Iran sanctions

U.S. President George W. Bush, left, is seen at a press conference with British Prime Minister Gordon Brown, right, at the Foreign and Commonwealth Office in London, Monday, June 16, 2008. Bush and British Prime Minister Gordon Brown used a joint news conference to show solidarity on an array of vexing foreign policy matters chiefly Iran, Iraq and Afghanistan. Bush dismissed reports he had differences with Brown on Iraq, where Britain has cut its troops. (AP Photo/Carl De Souza, Pool) (Carl De Souza - AP)

But an analyst said targeting Bank Melli may do little to sway Tehran.

"The Iranians certainly have been expecting it, and likely have been preparing for ways to work around it. Unless the Europeans (are) willing to sign on to a far more dramatic sanctions package, these measures seem likely to fail," said Justin Logan, associate director of foreign policy studies at the Cato Institute in Washington.

A news magazine in Iran, Shahrvand Emrouz, reported that $75 billion had been withdrawn from European banks and returned to Iran in the past week. The report could not be independently confirmed.

The United States last year accused Bank Melli of providing services to Iran's nuclear and ballistic missile programs.

While Europe has moved to reduce its trade ties with Iran, Tehran remains a key trading partner with the Islamic republic.

Germany alone did business worth about $5 billion last year and more than 1,000 firms are selling their products or services to Iran, some through public government subsidies.

Additionally, Europe's dependence on outside energy makes any attempt to strike hard at Iran's energy sector problematic. Europe is one of Iran's main export markets for crude oil, with firms such as TotalFinaElf, ENI and Statoil competing for development rights in Iranian oil fields.

European nations are also trying to build a pipeline from the Caspian region to the EU as a way to reduce European dependence on Russian natural gas.

Dutch Foreign Minister Maxime Verhagen said launching any new package of sanctions hinges on "how positive _ or not _ Iran's response will be to the economic incentives package."

But Iran _ which insists its program is exclusively focused on generating electricity _ said it would not accept any package demanding the suspension of uranium enrichment, government spokesman Gholam Hossein Elham said in Tehran.

The U.S. and other Western nations accuse Iran of using its nuclear program as cover for potential weapons development and are pushing for tougher measures if Tehran turns down the latest package.

The proposal presented Saturday was accompanied by a letter signed by Solana and the foreign ministers of the U.S., Britain, France, Russia, China and Germany that said it is "possible to change the present state of affairs" _ if Iran halts sensitive nuclear work.

___

Associated Press writers David Stringer in London, Deb Riechmann aboard Air Force One, and George Jahn in Vienna, Austria, Sarah El Deeb in Cairo, Egypt, and Business Writer John Wilen in New York contributed to this report.