16 October 2012 Last updated at 06:59 ET

Q&A: Iran sanctions

Iran insists that its nuclear programme is entirely peaceful

The United States and European Union have imposed new sanctions targeting Iranian oil sales as part of a drive to increase international pressure on Tehran over its nuclear programme.

What international sanctions are already in place on Iran?

The UN ratified four rounds of sanctions against Iran between 2006 and 2010 in reaction to its refusal to halt uranium enrichment and co-operate with the International Atomic Energy Agency (IAEA). These sanctions include a ban on the supply of heavy weaponry and nuclear-related technology to Iran, a block on Iranian arms exports, and an asset freeze on key individuals and companies. Resolution 1929, passed in 2010, mandates cargo inspections to detect and stop Iran's acquisition of illicit materials.

The EU has imposed its own restrictions on trade in equipment which could be used for uranium enrichment and has put in place an asset freeze on a list of individuals and organisations who, it believes, are helping advance the country's nuclear programme. It has also banned the individuals on the list from entering the EU. In December 2011, the bloc added 39 people and 141 companies to the list. The EU also banned the export to Iran of key equipment and technology for the refining and production of natural gas in 2011.

On 1 July 2012, an EU ban on the import, purchase and transport of Iranian crude oil came into force. The 27 member states had until then accounted for about 20% of Iran's oil exports. European companies were also stopped from insuring Iranian oil shipments, having previously underwritten 90% of them. The sanctions were phased in after being announced on 23 January, when the EU also froze assets belonging to the Central Bank of Iran, and banned all trade in gold and other precious metals with the bank and other public bodies.

In October 2012, the EU announced a new package of sanctions against Iran. The measures prohibit any transactions with Iranian banks and financial institutions unless specifically authorised or exempted, such as for humanitarian purposes. The import, purchase and transport of natural gas from Iran was also banned, as was the construction of oil tankers for Iran and the flagging and classification of Iranian oil tankers and cargo vessels.

Which individual countries have imposed sanctions on Iran?

The US has longstanding comprehensive sanctions in place on Iran. Diplomatic relations between the two countries were broken in April 1980 after the US embassy in Tehran was stormed by students during Iran's Islamic Revolution. Since then the US has imposed successive rounds of sanctions, citing what it says is Iran's support for international terrorism, human rights violations and refusals to co-operate with the IAEA.

The US sanctions prohibit almost all trade with Iran, making some exceptions only for activity "intended to benefit the Iranian people", including the export of medical and agricultural equipment, humanitarian assistance and trade in "informational" materials such as films.

In November 2011 the US, UK and Canada announced more bilateral sanctions on Iran, in reaction to an IAEA report which suggested Iran's nuclear programme might have a military purpose. The US expanded sanctions to target companies that aid Iran's oil and petrochemical industries, while the UK ordered all British financial institutions to stop doing business with their Iranian counterparts. On 28 June 2012, the US banned the world's banks from completing oil transactions with Iranian banks, although it issued six-month exemptions to 20 countries, including China.

Several other countries including Switzerland, Japan, Australia and Canada have also imposed bilateral sanctions on Iran in recent years in response to Iran's lack of co-operation with the IAEA.

Will there be a worldwide embargo on Iranian oil sales?

A US law signed on 31 December 2011, imposed new sanctions on financial institutions dealing with Iran's central bank. The law is intended to hamper Tehran's ability to sell oil abroad. A drop in Iran's oil exports would have a big impact on the Iranian economy but could also drive up the global oil price and harm Western economies.

President Obama tightened those sanctions by executive order on 6 February 2012, targeting Iran's central bank and allowing US institutions to freeze Iranian assets.

The EU's ban on imports of Iranian crude, which came into force on 1 July, is expected to have a more significant impact on the economy of the Islamic Republic, because the EU until then bought about a fifth of its oil exports.

Japan and South Korea, which used to account for 26% of Iran's oil exports, have expressed their willingness to consider reducing Iranian oil imports while warning of the possible economic repercussions.

Which countries are opposed to an embargo?

Russia has rejected any further sanctions against Iran. On 18 January 2012, Foreign Minister Sergei Lavrov said the scope for sanctions over Iran's nuclear programme had been exhausted and any additional measures were probably intended to provoke discontent in the Iranian population.

China and India have indicated that they do not intend to curb Iranian oil imports. On 16 January, the Chinese Foreign Ministry said Beijing objected to placing a country's domestic law above international law and forcing other countries to accept it.

Turkey, too, has signalled that it will not adopt any oil embargo. On 12 January, its energy minister said any decisions on sanctions taken outside the UN were not binding for Ankara.

UN approval for any further sanctions against Iran is highly unlikely as both Russia and China have a veto at the UN Security Council.

What has been the impact of the sanctions in Iran?

Iran's Supreme Leader, Ayatollah Ali Khamenei, and President Mahmoud Ahmadinejad both insist that the sanctions will fail.

However, even before the start of the EU oil embargo, Iranian crude exports had dropped to 1.5m barrels a day, from 2.5m barrels in 2011, costing it almost $32bn in revenue in 12 months, according to the US.

In September 2012, daily oil production in Iran fell to the lowest level since 1988. Data released by the International Energy Agency, a Paris-based group, showed Iran produced 2.63m barrels a day, down 220,000 a day from August. The agency forecast that production would continue to decline for years to come if Western sanctions were not lifted.

The sanctions, combined with the government's phasing out of subsidies, has seen the price of basic foodstuffs rise dramatically. The Iranian government said in July 2012 that it had stockpiled imported goods and $150bn in foreign currency reserves to help cushion the blow. By October, the Central Bank's foreign currency reserves were reported to have fallen to $110bn.

Riots broke out in Iran in October 2012 when the country's currency, the rial, plunged to new lows against the dollar. Local currency exchange websites said it had lost 80% of its value since the start of the year. With acute inflation from the rial's weakness a major source of concern, the authorities were forced to severely restrict currency trading.

Economists say the rial's decline is one of the clearest signs the accumulated impact of sanctions has severely weakened Iran's economy.