EU stikes deal on new Iran sanctions

Iran dismissed the latest set of sanctions, saying such steps would only intensify Iranian popular support for a nuclear programme it insists is solely for peaceful purposes.

But analysts said Iran's leadership may have underestimated Western resolve and over-played its familiar hardline brand of brinkmanship, making it hard for them to reach a compromise.

"The regime is very worried about a military strike. They have mishandled the issue and it is now very difficult for them to reach any kind of compromise," said a senior European diplomat in Tehran, who asked not to be named in a Reuters report.

"Also they are worried about a spread of the Arab Spring into Iran and cannot risk more economic pressure that can cause street protests," the diplomat said.

The ratcheting up of pressure on Iran follows a November 8 report by the International Atomic Energy Agency which presented intelligence suggesting Iran had worked on designing an atomic bomb and may still be secretly carrying out related research.

Iran said the report was "politically motivated."

Once the EU decision is formally approved by foreign ministers on December 1, European companies will be banned from doing business with the listed firms and organisations, while individuals will be subject to asset freezes and visa bans. The news helped push benchmark Brent crude above $108.

The EU move follows a coordinated tightening of the sanctions by the United States, Britain and