The US Treasury announced late Monday night that it has imposed sanctions on 11 entities and individuals under an existing executive order for their alleged assistance to Iran's nuclear program, including its enrichment and heavy-water programs. Their assets were frozen and any US person is banned from doing business with them.
Treasury Secretary Timothy Geithner issued a warning that any firms doing business with Iran's banking sector could run the risk of funding illicit activities.
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The US government named Iran as "a primary money laundering concern," but stopped short of adopting fully blown sanctions against Iran's central bank that could strain ties with European and Asian allies.
But, Geithner warned, "financial institutions around the world should think hard about the risks of doing business with Iran."
According to former US Treasury official, Avi Jorisch, Tehran has become increasingly dependent on the central bank to clear payments for energy sales as other banks have faced sanctions.
The White House also issued an executive order that targets Iran's energy sector. Any single transaction worth $1 million or more that supports the development of Iran's petroleum resources is banned under the new order, as is any transaction of $250,000 or more to maintain or expand the country's petrochemical sector.
Iran's energy sales are thought to account for around 70% of the government's budget and are crucial to the broader Iranian economy.
Secretary of State Hillary Rodham Clinton said Iran has been unwilling to negotiate over its nuclear program, despite broad international disapproval, or to halt what US officials maintain is the most active state-supported terrorism program in the world. "There have to be consequences for such behavior," she said.
"The message is clear: If Iran's intransigence continues, it will face increasing pressure and isolation," Clinton added.
President Barack Obama said in a written statement: "As long as Iran continues down this dangerous path, the United States will continue to find ways, both in concert with our partners and through our own actions, to isolate and increase the pressure upon the Iranian regime."
Iran can "fulfill its international obligations... or it can continue to defy its responsibilities and face even more pressure and isolation," he said.
The US action was coordinated with Britain and Canada, but not with countries such as Russia and China that have far greater economic investments in the Islamic republic.
Britain was the first to make the sanctions public early Monday, with finance minister George Osborne saying London was cutting links with Iranian banks.
While Russia's Foreign Ministry denounced the new sanctions as "unacceptable and contradictory to international law," Interfax news agency reported.
The sanctions are aimed at "preventing the Iranian regime from acquiring nuclear weapons," British Treasury chief George Osborne said. Canada took similar actions as the US, while France urged fellow European countries and Japan to stop buying Iranian oil and to freeze any assets belonging to Iran's central bank.
Russia, China, India and other nations maintain larger-scale trade with Iran, whose energy exports have helped it shrug off serious harm from the UN sanctions and other penalties applied by individual countries or the European Union.
The fresh sanctions came in response to an International Atomic Energy Agency report two weeks ago that came the closest yet to accusing Iran outright of seeking nuclear weapons.
Iran, already hit with four rounds of UN sanctions, strongly denies its nuclear program is geared towards making a bomb.
Iran's trade minister said Monday sanctions were hitting the economy but warned Western countries threatening to tighten the measures that they were harming their own interests.
In a change of tone from Tehran's usual line that sanctions have not damaged the economy, Minister of Industry, Mine and Commerce Mehdi Ghazanfari said the West was losing out too.
"Sanctions are a lose-lose game in which both side make a loss. If they don't invest in our oil projects, they will lose an appealing market," Ghazanfari told a news conference.
Italy's new foreign minister said he supports with "full conviction" the new US sanctions.
Giulio Terzi said on the ministry's website Tuesday that the sanctions are intended to induce Iran to cooperate with the International Atomic Energy Agency to clear up doubts about the nature of its nuclear program.
AFP, AP, Reuters contributed to the report