The Obama administration opened a new front Monday in its campaign to squeeze Iran economically by formally designating the country’s entire financial sector a “money laundering concern,” a move intended to discourage companies from doing business with Iranian banks.
The unusual measure was unveiled as U.S. officials announced new sanctions against Iran’s oil industry and expanded the growing ranks of Iranian companies and individuals blacklisted from trading with Americans. The White House stopped short of imposing sanctions directly on the Central Bank of Iran, as some U.S. lawmakers have urged.
Canada, Britain and France took similar — and, in some cases, harsher — steps in a coordinated effort to increase the economic pain for Iran after new allegations of secret efforts by Iranian scientists to acquire technology for nuclear weapons.
“The message is clear: If Iran’s intransigence continues, it will face increasing pressure and isolation,” said Secretary of State Hillary Rodham Clinton, who announced the measures at a news conference with Treasury Secretary Timothy F. Geithner.
Clinton asserted that the White House favors “engagement” with Iran, but she warned that the pressure would be ratcheted up if its leaders do not take steps to curb the country’s nuclear program.
“Today’s actions do not exhaust our opportunities to sanction Iran,” she said.
The package unveiled by the White House contained no major surprises — administration officials have been signaling their intentions for several days. But the collective actions by North American and European powers represented a significant tightening of the noose, diplomats and independent experts said.
By labeling Iran’s entire financial establishment a “money laundering concern,” the United States strongly cautioned corporations around the world that it is legally risky to do business with Iran’s banks, including the powerful Central Bank, Geithner said. Generally, major corporations have avoided working with financial institutions that have been legally sanctioned or publicly linked to criminal enterprises.
“If you are a financial institution anywhere in the world and you engage in any transaction involving Iran’s Central Bank or any other Iranian bank operating inside or outside Iran, then you are at risk of supporting Iran’s illicit activities,” Geithner warned.
Two European allies on Monday signaled their intention to take on the Central Bank of Iran directly. Sanctions imposed by Britain cut off all financial ties between Iranian and British banks, marking the first time a British government has severed all links to another country’s banking system. France urged Western nations to collectively freeze all overseas assets held by the Central Bank of Iran and suspend all oil transactions.
U.S. officials have been more cautious, saying additional study is needed to weigh the possible effects on global markets. Some economists think that a freeze on overseas assets of the Central Bank of Iran could sharply drive up world oil prices, which would hurt Western economies while possibly helping Iran by boosting oil revenue.
“No one really knows what the impact will be,” said a Western diplomat, who spoke on the condition of anonymity to discuss his country’s internal policy deliberations on Iran. “The truth is we’ve already done all the easy stuff on sanctions.”