Iran hits back at EU with own oil embargo threat

Fighting sanctions with sanctions in a trial of strength with the West over its nuclear ambitions, Iran warned on Friday it may halt oil exports to Europe next week in a move calculated to hurt ailing European economies.

At the same time, the government in Tehran, grappling with its own economic crisis under Western trade and banking embargoes, will host a rare visit on Sunday by UN nuclear inspectors for talks that the ruling clergy may hope can relieve diplomatic pressure as they struggle to bolster public support.

Since the UN watchdog lent independent weight in November to the suspicions of Western powers that Iran is using a nuclear energy programme to give itself the ability to build atomic bombs, US and EU sanctions and Iranian threats of reprisal against Gulf shipping lanes have disrupted world oil markets and pushed up prices.

Amid forecasts Iran might be able to build a bomb next year, and with President Barack Obama facing re-election campaign questions on how he can make good on promises - to the US and to Israel - not to tolerate a nuclear-armed Islamic Republic, a decade of dispute risks accelerating towards the brink of war.

Western diplomats see little immediate prospect of renewed talks between Iran and the UN's International Atomic Energy Agency, scheduled from Sunday to Tuesday in Tehran, as likely to elicit much in the way of concessions to Western demands.

For all the tension, there was little clear market response to Friday's talk by members of Iran's parliament that they may vote on Sunday to stop sending oil to the European Union - its second biggest customer - as early as next week, to spite EU states that gave themselves until July to enforce an oil import embargo on Iran.