US ups Iran sanctions, could target central bank

WASHINGTON – The Obama administration hit two senior Iranian military officials with travel and financial sanctions Tuesday and moved closer to a compromise with Congress over tough new sanctions against Iran's Central Bank that Washington worries could have unintended consequences.

Citing their roles in alleged human rights abuses, the Treasury Department added the chairman of Iran's joint chiefs of staff, the country's most senior military officer, and the deputy commander of the hardline Islamic Revolutionary Guard Corps to a U.S. blacklist. The move freezes any assets they may have in the U.S., although it is unlikely they have any such assets, and bars Americans from doing business with them. The State Department also barred the two men from entering the United States.

"The Iranian people have suffered tremendously at the hands of senior officials, who instead of protecting their basic rights have ordered and orchestrated widespread, serious human rights abuses aimed at silencing criticism and punishing dissent," said Adam J. Szubin, the Treasury Department's director of foreign assets control.

Hassan Firouzabadi, the joint chiefs chairman, and Abdollah Araqi were accused of wrongdoing in the crackdown on protesters and mistreatment of detainees after Iran's disputed 2009 elections. The sanctions may have little direct effect since the U.S. and Iran have no military ties and few financial or commercial ones.

But the administration appeared to be moving closer to endorsing legislation that could hurt Iran far more.

Congress pressed ahead Monday evening with a massive $662 billion defense bill that includes an amendment directing the administration to target foreign financial institutions that do business with the Iranian Central Bank in Tehran. The pressure comes amid heightened concern over Iran's nuclear program and links to alleged terrorist plots.

Administration officials had expressed concern that Congress' approach could drive up oil prices and cause havoc to world markets. Higher prices might also boost the value of Iranian oil sales, which amount to more than half of the Iranian government's revenue. That would defeat the point of the sanctions by allowing the Iranian government to increase its investments in uranium enrichment or other destabilizing activity, they had argued.

But State Department spokeswoman Victoria Nuland said Tuesday the administration was reviewing the bill and remained in close contact with Congress. And officials noted changes made to provide the president with greater flexibility in implementing the law, playing down some of the administration's earlier opposition to the amendment.

The sanctions would bar foreign financial institutions doing business with Iran's central bank from opening or maintaining correspondent operations in the United States.

Foreign central banks would be affected only for buying petroleum or petroleum products, and if the president determines there is a sufficient alternative supply and if the bank's home country has failed to significantly reduce its purchases of Iranian oil. The president can also waive the penalties based on national security.

Russia, China, India and other nations maintain larger-scale trade with Iran, whose energy exports have helped it shrug off serious harm from four rounds of U.N. sanctions and other penalties applied by individual countries or the European Union. But a number of U.S. allies also import Iranian oil, from Japan and South Korea in Asia to economic strugglers Greece, Spain and Italy in Europe.

To purchase the petroleum, those countries must deal with Iran's central bank.

A Western diplomat said European countries are readying more sanctions of their own against Iran, probably for early next year, which they hope will show their commitment to weaning their economies off of Iranian oil and protecting them against the threat of American financial penalties. The diplomat spoke on condition of anonymity because of the sensitivity of the issue.

South Korea has annual two-way trade of about $10 billion with Iran and is also worried about how its companies might be affected. Japan is facing similar questions, according to diplomats.