Iran is set to be hit hard by the toughest round of sanctions yet passed in response to its disputed nuclear programme - as the United States moves to target Tehran’s huge oil earnings.
A new law, signed by president Barack Obama on New Year’s Day, imposing sanctions on financial institutions that deal with Iran’s central bank, the main clearinghouse through which OPEC’s second largest oil exporter deals with clients around the world.
The West has imposed the increasingly tight sanctions over Iran’s nuclear programme, which Tehran says is strictly peaceful but Western countries believe is geared towards building an atomic bomb. After years of sanctions that had little impact, the new measures are the first that could have a major effect on Iran’s oil trade - 60 per cent of its economy. The prospect of sanctions that will seriously target the oil sector for the first time has hit Iran’s rial currency, which has fallen by 40 per cent against the dollar in the past month. Officials have denied sharp falls in the past two days are because of the sanctions.
However, queues formed at banks and some currency exchange offices shut their doors as Iranians scrambled to buy dollars to protect their savings from the currency’s fall. “The sanctions will force a choice between buying Iranian oil or engaging in the US financial system, the largest in the world,” said Brian Katulis, a security expert at the Centre for American Progress.
The European Union is expected to consider new measures by the end of this month, possibly including a blockade of Iranian oil. Although China, India and others are unlikely to sign up to any oil embargo, they will be able to insist on deeper discounts for their crude, reducing Tehran’s oil income.