Obama moving ahead with sanctions to squeeze Iran

New measures bar foreign financial institutions that do business with Iran from operating in US to buy or sell Iranian oil

Associated Press|Published: 03.30.12 , 22:27

President Barack Obama is moving ahead with tough new sanctions aimed at squeezing Iran's oil exports after determining there is enough crude on world markets to take the step without harming US allies.

Obama's move allows the US to go forward with sanctions on foreign banks that continue to purchase oil from Iran. The sanctions aim to further isolate Iran's central bank, which processes nearly all of the Islamic Republic's oil purchases, from the global economy.

US officials hope ratcheting up economic pressure will both push Iran to abandon its disputed nuclear program and convince Israel to give sanctions time to take hold before pursuing a military strike on Iran's nuclear facilities. The US and allies believe that Iran is pursuing a nuclear bomb; Iran denies that.

Under a sweeping defense bill Obama signed at the end of December, he had until Friday to determine if there was enough oil supply on the world market to allow countries to cut their oil purchases from Iran.

Obama announced his decision in a statement Friday after a source initially confirmed the news to The Associated Press.

Still time to avoid sanctions

The president said he based his determination on global economic conditions, the level of spare oil capacity and increased production by some countries, among other factors. He said he would keep monitoring the global market closely to ensure it can handle a reduction of oil purchases from Iran.

With oil prices already rising this year amid rising tensions over the nuclear dispute between Iran and the West, US officials have sought assurances that pushing countries to stop buying from Iran would not cause a further spike in prices.

The congressionally mandated sanctions target foreign financial institutions that do business with Iran's central bank – barring them from operating in the US to buy or sell Iranian oil. The penalties are to take effect at the end of June, around the same time Europe's embargo on Iranian oil kicks in.

Countries can still avoid the sanctions if they take steps to significantly reduce their imports before then.

Even before Friday's decision, the State Department announced that it would grant waivers to 10 European Union countries and Japan because of steps they have already taken to cut back on Iranian oil. An EU oil embargo, approved in January, is set to take effect in July.

The United States has not said what constitutes a significant reduction in Iranian oil purchases, and analysts believe the administration could use different metrics for different countries.