Embargo could take effect on 1 July although Greece, which is heavily dependent on Iranian oil, could be a stumbling block

A meeting of European ambassadors in Brussels on Thursday is expected to decide on an EU oil embargo on Iran to be imposed later in the year, diplomats have said.

Talks have been under way over the past few weeks aimed at narrowing differences between European capitals over the details of the ban on Iranian oil, including the grace period before the sanctions take effect and the timing of a review of the decision.

Majority opinion within the EU has coalesced around a proposal from the Danish government, acting EU president, for the embargo to be put into effect on 1 July, and for the decision to be reviewed beforehand in light of conditions in the oil market and developments in negotiations with Iran over its nuclear programme. No new oil purchase contracts could be signed with Iran in the intervening period.

Greece, which is heavily dependent on Iranian oil, has asked for a longer grace period, to allow it to arrange alternative suppliers and if necessary reconfigure its refineries to accommodate a new source and type of crude oil.

The sanctions package under discussion would also freeze the European assets of Iran's central bank, with exceptions for the financing of existing trade contracts and other exemptions that would be decided case by case. Ambassadors to the EU are due to meet on Thursday to finalise an agreement, although diplomats warned that if Greece or any other country continued to object, the ultimate decision could be left until a council of foreign ministers on Monday.

A decision to impose an EU embargo, which would come into effect at the same time as US punitive measures aimed at the global financing of Iran's oil exports, would radically increase pressure on Tehran, which has already been subject to four waves of UN sanctions for its refusal to suspend uranium enrichment. However, UN sanctions target individuals and organisations directly involved in the Iranian nuclear or missile programmes or its revolutionary guards. An embargo on oil, which provides 80% of Iran's foreign currency revenue, would affect the whole population.

The Russian foreign minister, Sergei Lavrov said on Wednesday that the oil sanctions had "nothing to do with a desire to strengthen the nuclear nonproliferation". He added: "It's aimed at stifling the Iranian economy and the population in an apparent hope to provoke discontent," and would derail hopes for resuming negotiations with Iran on the nuclear programme.

Russia believes that "all conceivable sanctions already have been applied" and that new penalties could derail hopes for continuing six-way negotiations on the Iranian nuclear programme, provoking Iranian intransigence, Lavrov said.

The Iranian foreign minister, Ali Akbar Salehi, claimed on Wednesday that Tehran was in contact with the international community with the intention of arranging a new round of talks aimed at averting an escalation in the confrontation over the Iranian nuclear programme, a year after the collapse of the last round of discussions in Istanbul.

"Negotiations are going on about venue and date. We would like to have these negotiations," Salehi told reporters during a visit to Turkey. "Most probably – I am not sure yet – the venue will be Istanbul. The day is not yet settled, but it will be soon."

However, European diplomats said they were not aware of any such contacts. New talks would have to be preceded by a letter from Tehran to Catherine Ashton, the EU's foreign policy chief who also serves as a representative of a group of six major powers handling nuclear talks with Iran, and her office said no such letter has arrived.

Iran has also invited a team of inspectors from the International Atomic Energy Agency to Tehran on 28 January for discussions in the wake of an IAEA report in November which cited "credible" evidence that Iran had conducted experimental work on nuclear weapons design. The report said it was less clear whether that work had continued after 2003. The report triggered both the new US and EU sanctions.

The IAEA has not confirmed the visit, pending a preliminary agreement with Tehran on the agenda.

Rafael Grossi, an Argentinian diplomat who is IAEA assistant director general, said earlier this month that the talks would have to include what the agency terms the "possible military dimensions" (PMDs) of the Iranian programme, which Tehran insists is purely for civilian purposes.

Grossi, who is the top adviser to the IAEA director general, Yukiya Amano, told the Buenos Aires Herald said that "on January 28, we will try to draft a road map to see how we tackle specific issues, including those related to the PMDs". He said that if Tehran refused to discuss the evidence of weaponisation, the IAEA board of governors would take the issue to the UN security council, possibly leading to sanctions.

"It would be very serious for Iran as, up until now, China and Russia have blocked sanctions on the grounds that Tehran is co-operating with the Agency. If the IAEA tells the world that Iran is not co-operating, Russia and China will be left without justification for their support," Grossi said.