updated 8/8/2008 6:46:03 PM ET 2008-08-08T22:46:03

The European Union tightened trade sanctions against Iran Friday for defying a long-standing international demand to freeze uranium enrichment.

The new EU restrictions go slightly beyond existing U.N. trade sanctions and are designed to deny public loans or export credits to companies trading with Iran. France, which holds the rotating EU presidency, said European governments would also carefully watch financial groups doing business with Iranian banks and step up checks on ships and airplanes traveling to Iran.

"This resolution expands the range of restrictive measures adopted by the U.N. Security Council," an EU statement said. It called on member nations to "show restraint when granting new public loans for trade with Iran ... (and) to also be vigilant on activities taken by financial institutions with banks based in Iran."

Iran has refused to comply with repeated international demands to halt uranium enrichment, a process that can be used to produce fuel for nuclear weapons or nuclear energy. The U.S. suspects the program is aimed at making nuclear weapons though Iran insists it is for peaceful purposes.

Earlier this week, France and the U.S. said Iran's response was insufficient to defuse the dispute because it has skirted the central question of whether it was ready to halt uranium enrichment.

The new sanctions expand existing limits on trade with Iran beyond the U.N. Security Council's three sets of sanctions that monitor trade and banking. But they do not go as far as sanctions on Iran's oil and gas trade that EU ministers threatened in June.

U.K., U.S. want to target oil and gas
Britain, the United States and their allies want to go further with their own sanctions targeting oil and gas and the finance sector that could badly hit Iran's already fragile economy. The tough independent sanctions would be a bid to overcome opposition from veto-wielding Security Council members China and Russia to a hardening of U.N. sanctions, a senior British official said Friday.

Oil-rich Iran draws 80 percent of its revenues from energy exports and is already suffering high inflation and rampant unemployment.

The British official, who requested anonymity because of the sensitivity of ongoing negotiations, said the measures would be in addition to — not in place of — a fourth set of tougher U.N. Security Council penalties, which Britain expects to be considered in New York in October or November, and the newly tightened EU trade sanctions.

The EU's head office, the European Commission, separately began implementing on Thursday the third round of U.N. sanctions agreed in March. Those measures prevent some Iranian officials from getting EU visas and freeze the assets of people or companies involved in the nuclear program.

The U.N. sanctions also forbid European companies from selling some products that could help Iran build nuclear weapons.

Under the newly tightened EU sanctions approved Friday, EU countries will also now inspect airplanes and ships traveling to and from Iran if they have reason to believe that they are carrying contraband goods. France said they would focus on Iran Air Cargo and the Islamic Republic of Iran Shipping Line.

Incentives package
European governments will also monitor banks dealing with Bank Saderat, an Iranian bank with purported links to suspect Iranian nuclear activities, under the tighter EU sanctions.

The EU is Iran's biggest trading partner with two-way trade totaling $39 billion in 2006.

The U.N. Security Council's five permanent members and Germany have tried to entice Iran into suspending uranium enrichment by offering a package of economic, technological and political incentives.

Iran said Tuesday it would only give a clear response to this offer when it gets a direct response on questions it has about the incentives.

Iran may soon face a fourth set of Security Council sanctions if it does not accept the incentives package.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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