France and Great Britain want an outright embargo on importing oil from Iran though cash-strapped Greece might have serious objections, diplomats say.
Iran gets the bulk of its revenue from oil exports. Amid growing concerns about Iran's nuclear ambitions, Western allies are keen to pressure Iran to back from its perceived goal of a nuclear weapon.
Diplomats in London and Paris are expected to push for a European ban on oil imports from Iran. Greece, which gets about 25 percent of its oil from Iran, can't afford the potential economic pressure that would come from an embargo, however.
European diplomats said that with more than $145 billion in bailout money on the table, however, Athens might be easily convinced to change its mind.
Over the next few weeks we have to help Greece find alternative sources of supply, a European diplomat told the Financial Times on condition of anonymity. But we think other sources can be found and the entire sanctions package is likely to be agreed.
Scenarios are mixed, with some analysts seeing a substantial spike in oil prices from an Iranian embargo while others see Tehran handicapped significantly without oil revenue.
Europe isn't expected to make a decision right away. This, diplomats say, should give major importers time to find additional supplies from other countries and give the Libyan oil sector time to recover from war.