The United States on Monday sought to tighten the financial screws on Iran by imposing sanctions on the country's third-largest bank for allegedly helping Tehran develop its nuclear program.
Now any foreign firm that deals with Iranian state-owned Bank Tejarat and its affiliate, Belarus-based Trade Capital Bank, will no longer be able to access the US financial system.
The sanctions "will deepen Iran's financial isolation, make its access to hard currency even more tenuous, and further impair Iran's ability to finance its illicit nuclear program," Treasury Undersecretary David Cohen said in a statement.
The United States and Europe are pressuring Iran to talk to the international community about its nuclear activities, which the West says are aimed at developing a weapons program but which Tehran says are peaceful.
The European Union on Monday banned imports of oil from Iran and followed the United States in imposing sanctions on its central bank, which acts as the clearinghouse for the country's oil revenue.
A senior US Treasury official said he was optimistic that Europe would also blacklist Bank Tejarat, which has nearly 2,000 branches in Iran, as well as branches in France and Tajikistan.
Bank Tejarat was penalized for providing financial services to the Islamic Republic of Iran Shipping Lines and other entities already sanctioned for their involvement with the country's nuclear program.
The action "strikes at one of Iran's few remaining access points to the international financial system," Cohen said. Twenty-three Iranian-linked firms have been sanctioned by the United States, a list that now includes all of the largest state-owned banks.
Washington also accused Bank Tejarat of indirectly supporting the activities of Iran's Revolutionary Guard.
The United States is working to apply sanctions signed by President Barack Obama last year that seek to block countries and their institutions from dealing with the Iranian central bank.
The aim is to starve Iran of revenues needed to develop nuclear weapons without disrupting jittery oil markets and impeding the US economic recovery.
"We do expect there will be a significant reduction in Iran's exports," said the senior US official.
He would not quantify the amount but said the Obama administration anticipates that Iran would have a hard time accessing revenues from the oil it was able to sell once the sanctions were fully in place.
Iran is the world's third-biggest crude exporter and its economy is heavily reliant on the oil industry.