(CNN) -- European Union foreign ministers imposed fresh sanctions on Iran Monday, banning the import of Iranian crude oil and petroleum products in order to cut off sources of funding for Iran's nuclear program, the bloc announced.
It also froze the assets of Iran's Central Bank in the EU, and blocked trade with Iran in gold, diamonds and precious metals, it said.
And it is blocking the export to Iran of "key" petrochemical equipment and technology from the EU, it said.
The sanctions come because of Iran's "defiance of six U.N. Security Council resolutions and its refusal to enter negotiations over its nuclear program," British Foreign Secretary William Hague said in a statement from Brussels, Belgium.
Iran exports 2.2. million barrels of oil a day, with about 18% bound for European markets, according to the U.S. Energy Information Administration. The world consumes about 89 million barrels of oil per day.
Why Iran is important in the oil world
The EU will allow contracts that are already in place to be fulfilled until July 1, it said.
Saudi Oil Minister Ali al-Naimi told CNN last week that his country could make up the difference if Iran was banned from exporting oil.
Al-Naimi said the country has a spare capacity "to respond to emergencies worldwide, to respond to our customer demand, and that is really the focus. Our focus is not on who drops out from production, but who wants more."
Tehran has threatened to close the Strait of Hormuz, the only outlet to and from the Persian Gulf between Iran and the United Arab Emirates and Oman, as it faces possible sanctions.
The United States has made clear it will not let that happen.
The critical shipping lane had 17 million barrels of oil per day passing through in 2011, according to the EIA.
The Iranian government gets about half its revenue from oil exports, according to the EIA.
Analysts have said that while the new sanctions are the toughest ever imposed, they still contain many loopholes.
Iran is expected to still be able to sell its oil to places like China, India or other Asian countries, but perhaps at a discount of 10% to 15%. About 35% of Iran's oil exports currently go to China and India.
Western leaders have been walking a fine line with Iran, working to come up with a plan that squeezes the country's finances yet doesn't result in a loss of Iranian oil exports, which could send crude and gasoline prices skyrocketing.
The United States and United Kingdom have already put new measures in place against Iran, and Washington has been pressing allies including Japan and South Korea to stop buying Iranian oil.
On Friday, EU foreign policy chief Catherine Ashton challenged Iran to respond to an offer she made in a letter last October.
Ashton wrote that world powers are open to negotiations if Iran is serious about addressing its nuclear program without preconditions. Her office released the letter on Friday.
Ashton's spokesperson pointedly noted, "We are waiting for the Iranian reaction."
Ashton wrote that the West wants to "engage in a confidence-building exercise" that would lead to a "constructive dialogue" and a "step by step approach" in which Iran would assure the international community that its nuclear program is peaceful.
Secretary of State Hillary Clinton told reporters in Washington that "we stand by that letter."
"They have to give up their nuclear weapons program ... and they have to be willing to come to the table with a plan to do that," she said.
Clinton made the comments after a meeting at the State Department with German Foreign Minister Guido Westerwelle.
The German minister was blunt in his assessment of Iran's actions: "Tehran keeps violating its international obligations on the transparency of its nuclear program. We have no choice but to pass tough new sanctions that address the financial sources of the nuclear program."
Iran says its nuclear program is not military, but the United States and many of its allies suspect Iran intends to produce a bomb. The International Atomic Energy Agency has expressed similar concerns.
"One thing is clear," Westerwelle added. "The door for serious dialogue remains open, but the option of nuclear weapons in Iran is not acceptable to both of us."
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