The new penalties target China's Bank of Kunlun and Iraq's Elaf Islamic Bank. In a statement, Obama said the sanctions make clear that the US will expose any financial institution that assists "the increasingly desperate Iranian regime" to access the international financial system.
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"By cutting off these financial institutions from the United States, today’s action makes it clear that we will expose any financial institution, no matter where they are located, that allows the increasingly desperate Iranian regime to retain access to the international financial system," the president said in the statement.
The election year announcement comes as Obama aims to show he is being tough on Iran amid criticism from Republican rival Mitt Romney.
"Since taking office, we have presented the Iranian government with a clear choice: come in line with your international obligations and rejoin the community of nations, or face growing consequences," Obama said.
"With these actions, we are once again reaffirming our commitment to hold the Iranian government accountable for its actions. The United States remains committed to a diplomatic solution, but the onus is on Iran to abide by its international obligations. If the Iranian government continues its defiance, there should be no doubt that the United States and our partners will continue to impose increasing consequences."
Obama also expanded penalties on Iran's energy and petrochemical sectors, authorizing sanctions on those who try to purchase oil from the Islamic republic through the National Iranian Oil Co. and the Naftiran Intertrade Co. Earlier US sanctions already penalized entities that purchased oil through Iran's Central Bank.
However, the sting of those sanctions was lessened when the US granted waivers to 20 countries because they had significantly reduced their purchases from Iran. Countries that received waivers for Central Bank purchases will also be exempt from these expanded penalties.
Ben Rhodes, Obama's deputy national security adviser, said existing sanctions already have resulted in a significant amount of Iranian oil coming off the market, the Iranian currency has lost nearly 38% of its value in the past year and that firms from around the world have divested themselves from doing business with Iran.
Some Republicans, including Romney, and Israeli officials are skeptical about whether economic pressure will persuade Iran to halt its nuclear program.
"All the sanctions and diplomacy so far have not set back the Iranian program by one iota," Prime Minister Benjamin Netanyahu said this week.
A third set of sanctions announced by the White House on Tuesday targets individuals and entities that help Iran purchase dollars or precious metals like gold in attempt to boost its sagging currency.
Obama's new sanctions come as Congress pushed ahead this week with a new package of crippling sanctions on Iran that target energy, shipping and financial sectors.
"The congressional efforts can be complimentary to what we're doing," Rhodes said, adding that administration officials have worked closely with lawmakers on the legislation.
The West suspects Iran is pursuing a nuclear weapon. Iran says the program is for peaceful purposes such as power generation and medical treatment.