According to four diplomats, European Union talks on an oil embargo on Iran are becoming bogged down over discussions on exemptions for existing supply contracts and the length of a planned phase in period.

Greece, Italy and Spain are trying to soften a UK push for a blanket ban, concerned that an oil supply shock would further damage their economies already hit by the European debt crisis, the diplomats said, declining to be identified because no final agreement has been reached.

The diplomats said that foreign ministers from the 27 EU member states are scheduled to decide at a January 23rd 2012 meeting in Brussels when to impose and how to phase in the embargo. The EU said it brought forward the meeting from January 30th 2012 to avoid a clash with a leaders' summit the same day.

According to the officials, the scenarios the EU is considering include imposing a ban on future Iranian crude imports that would leave existing contract shipments exempt until a later date. That would protect European countries that import the most Iranian oil, such as Italy and Greece.

According to the US Energy Department's Energy Information Administration, Greece relied on Iran for 14% of its oil imports in the first half of 2011.

The bloc is also considering exempting Eni SpA, Italy's largest oil company, from the ban, according to the officials. Italy gets 13% of its imported crude from Iran, which supplied Rome based Eni to pay off its debts.

The US tightened sanctions on Iran on December 31st 2011 and is pushing the EU to follow suit. EU sanctions on Iran already include an embargo on equipment for the oil and natural gas industries and a ban on investment in the sector. The bloc has also imposed restrictions on transfers of funds to and from Iran and vigilance over business with the country.

(Sourced from www.bloomberg.net)