New US sanctions go after Iran's currency, auto sector

WASHINGTON (AFP) - The United States has unveiled aggressive new sanctions against Iran, directly targeting the rial currency for the first time and also the auto sector, a key source of jobs and revenue.

The measures, which could wreak more economic deprivation inside Iran, came days before a presidential election in the country and followed Teheran's refusal to cede ground in stalled world power talks on its nuclear programme.

They were accompanied by new US warnings of a "painful" and "powerful" escalation of the sanctions regime, as President Barack Obama seeks to convince the Islamic Republic the price of uranium enrichment is too high.

"The steps taken today are part of President Obama's commitment to prevent Iran from acquiring a nuclear weapon, by raising the cost of Iran's defiance of the international community," White House spokesman Jay Carney said on Monday.

Mr Obama signed an executive order authorising sanctions on foreign banks and financial institutions that make transactions in the rial or keep accounts denominated in the currency outside the country.

The ninth set of sanctions signed by Obama against Iran will also penalize anyone involved in the significant sale of goods and services to Iran's auto industry - a move that could hit foreign car giants in Europe and Asia.

Another official said the strategy represented a significant escalation of the sanctions as, for the first time, Washington was attacking the rial, which has lost two-thirds of its value over the last two years.

"This promises to make Iran's weak currency even weaker and more volatile," the official said.

"The idea here is to make the rial essentially unusable outside of Iran."

Analysts said the new move by Mr Obama was a sign that the administration was wedded to a strategy of ever increasing economic pressure on Iran as the showdown over its nuclear program hits a critical point.

"It's a serious escalation of sanctions because the administration is blacklisting the auto sector which is the second-largest employer in Iran after the energy sector," said Mr Mark Dubowitz, of the Foundation for Defence of Democracies.

Mr Dubowitz also said that the move against the auto sector was a sign the administration was concerned it could be used to procure "dual use" technologies that could be used in centrifuges enriching uranium.

The announcement of new sanctions came as the campaign gathers pace ahead of June 14 elections to succeed President Mahmoud Ahmadinejad.

While the campaign has featured debate on the economic pain exerted by US and international sanctions, the poll is unlikely to alter Iranian nuclear policy, which is controlled by Supreme Leader Ayatollah Ali Khamenei.

All presidential hopefuls - including Iran's top nuclear negotiator Saeed Jalili - have insisted that the nuclear project will proceed whoever wins.

The United States has warned that it will not rule out military action against Iran's nuclear programme and that time is running out for diplomacy to succeed.

Talks between Iran and the permanent five members of the UN Security Council plus Germany are on hold pending the election.

Iran denies that its nuclear enrichment activities are intended to produce a nuclear bomb and says the programme is purely intended for power generation.

A US official warned Iran must address the international community's concerns or "face ever more powerful sanctions, ever more painful economic hardship and ever increasing isolation."

But Mr Karim Sadjadpour, an Iran analyst with the Carnegie Endowment for International Peace, said that although the new measures could cause significant hardship for Iranians, they were not a game changer.

"I don't see them giving Ayatollah Khamenei existential angst," he said.

"Middle and upper class Iranians who can no longer buy Mercedes, Peugeot, and South Korean automobiles will be inconvenienced and offended by this edict, but I don't see them taking to the streets because of it."