Other proposals from the British, French and German governments include working more closely with the maritime industry to halt the reflagging of Iranian ships and tightening bans on sales of potential dual-use technology that might have nuclear or missile applications, the EU diplomats said.
Further financial penalties might include blocking more Iranian central bank transactions with European banks and halting so-called U-turn transactions for Iran that begin and end with a non-Iranian bank, according to the EU officials. Such measures would severely limit EU trade with Iran, proponents say.
Although the EU imposed an Iranian oil embargo on July 1, Europe continues to export billions of dollars of worth of goods and services to Iran, said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a Washington research group that advocates tougher sanctions.
According to figures compiled by FDD from EU government sources, Germany exported 1.4 billion euros of goods to Iran between January and July of this year, and Italy exported 550 million euros worth between January and May 2012, Dubowitz said.
One senior European diplomat who called the existing sanctions unprecedented in their scale said the aim of new measures would be to bring Iran's economy to its knees in a way that hurts the regime rather than the people.
Iran's rial is already in a tailspin, dropping 18 percent on Oct. 1, reaching a record low of 35,000 to the dollar on the unofficial market, and losing more than half its value against the dollar in street trading in the past two months.
Iran's free-falling currency has turned meat into a luxury, sparking overnight price surges and spurring shoppers to stockpile goods, Tehran shopkeepers said in interviews. Riot police yesterday fired tear gas and sealed off parts of downtown Tehran after the currency's plunge triggered street protests.
The inflation rate, which Iran's Parliament Speaker Ali Larijani last week estimated at 29 percent, sent the price of milk in Tehran up 9 percent yesterday.
The financial and oil sanctions now in place may be triggering a balance of payments crisis that could cripple the Iranian government's ability to pay for essential imports, according to European and U.S. officials who spoke on condition of anonymity because of the sensitivity of the issue.
The plummeting Iranian currency is making imports prohibitively expensive. Combined with insufficient foreign exchange reserves that limit the euros and dollars available to pay for imported goods and services, new "EU sanctions that restrict Iran's ability to import critical European goods and services could combine to push Iran to economic collapse," Dubowitz said in an interview.
U.S. and European officials also credit the sanctions -- in conjunction with poor economic management in Iran -- for spurring capital flight from Iran and a crisis of confidence in the currency.