West shifts stance on Iranian sanctions Western powers are prepared to offer Iran an "oil carrot" that would allow it to continue supplying crude to Asian customers in exchange for guarantees it is not building an atomic bomb. As the five permanent member of the United Nations Security Council, Germany and the European Union prepare for talks with Iranian officials in Baghdad on Wednesday, diplomats and oil executives said Washington and Brussels were likely to hold out the prospect of a possible suspension of an EU insurance ban on ships carrying Iranian oil. They added that the US and EU are not prepared to lift other sanctions - including an EU import ban on Iranian oil - and also cautioned that a deal is unlikely to be agreed at the meeting. Waiving the EU insurance ban, which takes effect on July 1, would allow China, India, Japan and South Korea to buy shipping insurance in London, which dominates the market. Asian refiners have warned that without a waiver they would not be covered against the risk of multibillion pollution claims and would have to halt their purchases of Iranian crude. Asian governments have been considering offering sovereign insurance to their refiners. Brussels has already acknowledged it is reviewing the ban to ensure it does not have any "undesired" impact on the energy market. Oil executives estimate Japan and South Korea could stop buying an additional 400,000 barrels a day from Iran from July if they do not receive a waiver in the next two months. Iran exports roughly 2.2m b/d. A temporary suspension of the ban on protection and indemnity, known as P&I insurance, is one of the least controversial concessions that could be offered by the US and Europe, which could face criticism at home for being too soft on Tehran. Western diplomats also cautioned that they wanted to see what concessions Iran might offer over the next weeks, especially regarding its handling of highly enriched uranium, before they decide on a final response. "Clearly, if Iran offered a verifiable and major concession to export a part of its stock of its highly enriched uranium and ceased production [of highly enriched uranium], we would discuss how to respond," a western diplomat told the FT. This is a negotiation ... We are not travelling to Baghdad with any kind of offer on P&I in our pocket. Hossein Mousavian, a former Iranian nuclear negotiator now at Princeton University, said Tehran would expect "substantial relief on central bank and oil sanctions" in return for major concessions on its nuclear programme. Tehran insists that its nuclear programme is peaceful, while the US and EU suspect its real aim is to build an atomic weapon. Lifting the insurance ban over the next few months would help minimise the impact of the sanctions on the global oil market. The US and EU diplomats say their intention is not to take all Iranian oil off the market, which could lead to a spike in prices, but to squeeze Iranian revenues by blocking only some sales. At the talks, the EU and six world powers will present Iran with a detailed package of confidence building measures which they want Iran to undertake immediately, such as freezing its production of more highly enriched uranium. In return, the international community would assist Iran on a range of issues such as boosting nuclear safety. "We will lay down a package of things we want Iran to do and we will undertake reciprocal steps," said a western diplomat. Our hope is to come away from Baghdad with Iran agreeing to work with us on the implementation of this package by the time we hold another meeting.