The EU will increase the pressure on Iran on Thursday by unveiling more sanctions, including banning investment in the country's key energy sector.
The measures will also include blacklisting and freezing the assets of members of the elite Iranian Revolutionary Guard Corps.
A draft declaration on Iran, obtained by the Guardian and to be agreed by European government chiefs at a Brussels summit, states that "new restrictive measures have become inevitable" because of Tehran's suspect nuclear programme and its refusal to negotiate over it.
In what is a long-running standoff, the UN security council agreed a fourth round of sanctions against Iran last week.
China and Russia, traditionally opposed to sanctions, voted for the measures, while Turkey and Brazil voted against, weeks after striking a surprise nuclear fuel swap deal with Tehran.
Western countries were shocked and dismayed by the sudden announcement of the deal by Turkey and Brazil, which was seen as a coup by Tehran in outwitting the west and confounding a western policy aimed at isolating it.
The EU draft, agreed by foreign ministers yesterday, puts a brave face on the setback, saying it "welcomes the recent efforts by Turkey and Brazil".
Diplomats said the aim was to try to keep Turkey on the western side while quarantining Tehran, but leaders will declare on Thursday that the Turkey-Brazil deal does "not address the core of Iran's nuclear issue".
Despite objections from Sweden – which argues against sanctions as an effective foreign policy tool – reservations from Spain and Cyprus, and, crucially, reluctance in Germany, whose businesses are heavily engaged in the Iranian energy sector, the EU declaration calls for extra sanctions over and above those agreed in New York last week.
The sanctions are targeted at "key sectors of the gas and oil industry with prohibition of new investment, technical assistance and transfer of technologies, equipment and services in particular".
Iran has the second-largest gas reserves in the world, and also has large oil reserves but lacks refining capacity.
German industry has been strongly involved in the energy sector, and Berlin, wary of imposing the sanctions, argued that it would simply forfeit the business, which would go to China instead.
"Some companies ask what does that mean for their business, but what would nuclear bombs in the hands of Iran cost us?" Guido Westerwelle, the German foreign minister, said.
The declaration adds that further sanctions will be concentrated on financial services, saying: "These should focus on the areas of trade, especially dual use goods and further restrictions on trade insurance; the financial sector, including freeze of additional Iran banks, restrictions on banking and insurance; the transport sector as regards the [Islamic] Republic of Iran Shipping Line and its subsidiaries and air cargo."
The government chiefs are expected to sign off on the sanctions and instruct foreign ministers to decide on the detail next month.
The EU penalties go beyond those agreed in New York because the effort to obtain Russian and Chinese backing meant those measures fell well short of what the US was seeking.
As has become the established pattern in the battle of wits between Tehran and the west, the Iranian president, Mahmoud Ahmadinejad, dismissed the EU move in advance.
"Big powers want to impose their will on other nations ... we do not need the financial support of these countries," he said.
"The arrogant countries ink deals [with Iran] but later decide at some other place to pass a resolution and then unilaterally cancel the deals."
He hailed a "new era" in the Iranian gas industry, announcing deals he said were worth $21bn (£14bn) awarded to industrial conglomerates said to be run by the Revolutionary Guard to develop new gas fields.
The heart of the nuclear dispute concerns Iran's ambitious uranium enrichment projects, developed over the past two decades mostly in secret.
The EU statement said international concern had been increased by Iran's decision to enrich uranium to 20%, far higher than needed for civil nuclear energy generation.
Source : guardian