IRAN pledged to counter the effects of a European Union (EU) oil embargo which took effect yesterday, saying it had built up foreign reserves to protect itself.

The EU ban on crude imports is part of a push by western countries aimed at choking Iran's export earnings and forcing it to curb a nuclear programme they fear includes weapons.

"We are implementing programmes to counter sanctions and we will confront these malicious policies," Mehr news agency quoted central bank governor Mahmoud Bahmani as saying.

He said the sanctions were tough but that Iran had built up $150bn in foreign reserves.

The EU banned new contracts for Iranian crude in January, but allowed existing ones to continue until yesterday. EU companies are also barred from transporting Iranian crude or insuring shipments under the sanctions. "They signal our clear determination to intensify the peaceful diplomatic pressure," said British Foreign Secretary William Hague.

The US also imposed a new round of sanctions that could punish foreign countries dealing in Iranian oil, although it gave exemptions to 20 major oil buyers that are cutting purchases. Media reports said SA, which is exempt from US sanctions on Iranian oil imports, bought R1,9bn worth of oil from Iran last month, compared to R3,26bn a year earlier.

Iranian Oil Minister Rostam Qasemi said oil importers would be the big losers if a blockade led to price rises. But there are signs of the embargo affecting Iran's economy. Its crude oil exports - which EU estimates say represent half its income - have fallen by 40% this year. Iran used to export a fifth of its crude to the EU.

The Iranian rial has fallen and inflation is running at more than 20%. Thousands of Iranians have lost their jobs and trade between Iran and Europe has halved in a year, according to Eurostat data from March.