New Iran sanctions also hit banks in China, Iraq
Iranian President Mahmoud Ahmadinejad
July 31st, 2012
06:37 PM ET

New Iran sanctions also hit banks in China, Iraq

By Jamie Crawford

President Barack Obama announced new U.S. sanctions targeting Iran's oil Tuesday as well as banks in China and Iraq, warning that Tehran faces "growing consequences" for refusing to answer international questions about its nuclear program.

Obama said China's Bank of Kunlun and the Elaf Islamic Bank in Iraq "facilitated transactions worth millions of dollars" for Iranian banks already under sanctions.

"By cutting off these financial institutions from the United States, today's action makes it clear that we will expose any financial institution, no matter where they are located, that allows the increasingly desperate Iranian regime to retain access to the international financial system," Obama said in a statement issued by the White House.

On a conference call with reporters Tuesday, Ben Rhodes, deputy national security adviser for strategic communications, said the purpose of additional sanctions was to "affect Iran's calculus" to get Tehran to negotiate seriously over its disputed nuclear program.

The United States will continue to "look for ways to increase the impact" of sanctions on Iran, Rhodes said. "It's only going to get worse for the Iranian government," he said.

The sanctions announced Tuesday come on the heels of a complete European Union embargo on the purchase of Iranian petroleum that took effect at the beginning of the month, and the imposition of U.S. sanctions that cut off the U.S. financial system from any entity that facilitates the purchase of Iranian oil through the Central Bank of Iran.

The United States recently granted exceptions to those sanctions to all major importers of Iranian oil based on evidence that those countries had significantly reduced their purchase of Iranian petroleum. Countries granted exceptions must demonstrate every 180 days their continued reduction of such purchases in order to avoid U.S. sanctions.

The International Energy Association has said that exports of Iranian oil have dropped from a rate of 2.5 million barrels a day in 2011 to below 1.5 million barrels a day in June.

On the same call Tuesday, Robert Einhorn, special adviser for nonproliferation and arms control at the State Department, said the drop represented a decline of 40% to 50%, and approximately $9 billion per quarter in lost revenue for Iran.

The value of Iran's currency, the rial, has also dropped some 38% in value since international sanctions began to take effect the Obama administration said.

In Tuesday's action, Obama issued an executive order against Iranian energy and petrochemical sectors in an effort to prevent the establishment of payment mechanisms that would allow the circumvention of existing sanctions.

In addition to formal transactions of Iranian oil conducted through banks and other financial institutions, the new sanctions seek to punish purchases done through informal means or barter that have sought to go around existing sanctions targeting transactions through Iran's Central Bank.

The executive order also broadens U.S. sanctions on any person or entity engaged in the purchase or acquisition from Iran's petrochemical industry, its second largest export industry behind oil. The petrochemical industry itself generates approximately $9 billion a year in foreign revenue for the Iranian government.

The executive order also authorizes the Treasury Department to take actions that prevent Iran from getting access to U.S. dollars and precious metals, such as gold, in an effort to arrest the decline of its currency.

"These and other provisions send a clear signal to Iran that the Obama administration is determined to increase the pressure until Iranian leaders negotiate seriously" over their nuclear program with the United States and its international partners, Einhorn said on the call.

In announcing the action against the two banks, the Treasury Department said the sanctions were part of a wider effort to expose and isolate Iranian financial institutions connected to Iran's support for terrorism and proliferation of weapons of mass destruction.

"Imposing sanctions on Kunlun and Elaf underscores Treasury's commitment to use all the tools at its disposal to intensify financial pressure against Iran while protecting the U.S. financial system from illicit activity," Under Secretary for Terrorism and Financial Intelligence David S. Cohen said in a written statement.

"Any bank, anywhere, that seeks to provide a financial lifeline to Iran's designated financial institutions should know that it will be held accountable and its activity will be exposed."

On the call with reporters, Cohen said the "collateral benefit" of the sanctions is that Iran is finding it increasingly difficult to make payments in the international financial system, which in turn make it more difficult to procure materials for the nuclear program. The sanctions on Kunlun and Elaf would have a "chilling effect" on the willingness of other international financial institutions from doing business with Iranian banks Cohen said.

Tuesday's actions from the administration come at the same time that negotiators in the House and Senate reached an agreement on even greater sanctions on Iran's energy and financial sectors. It is possible both chambers could vote on the measures later this week before the August recess.

Rhodes told reporters the administration is reviewing the text of the legislation, but was "quite optimistic" the administration would "continue to work in lock step with Congress" on sanctions with Iran.

Moments after the adminsitration made its announcement, an influential member of Congress made clear there was still work ahead.

"This legislation and today's executive action are important steps in the right direction, but not the final word on Iran sanctions," Rep. Howard Berman, D-California, the ranking member of the House Foreign Affairs Committee said in a written statement. "Unless Iran agrees to end its weapons program, we must continue to pursue even tougher measures that would result in crippling sanctions on the Iranian regime."

In Tuesday's statement, Obama said Washington "remains committed to a diplomatic solution, but the onus is on Iran to abide by its international obligations."

"If the Iranian government continues its defiance, there should be no doubt that the United States and our partners will continue to impose increasing consequences," he said.

CNN's Matt Smith contributed to this report.

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Filed under: China • Iran • Iraq • Sanctions • Treasury
soundoff (47 Responses)
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  10. Tonyproper

    U. S. and other patiners are doing the right thing and shall also be comitted to do more than sanction, but if sanction can't make iran comply Israel must do what it can to get iran off it's neck.

    August 2, 2012 at 1:57 am | Reply
  11. Jannani

    America is a failed state.
    Look at month to month job creation 68K, 77K 80K last three month.
    Its public debt will be 24 trillion by 2015.

    August 1, 2012 at 8:46 pm | Reply
  12. Sdabby

    I lived in Iran for 11 years during the era of the Shah and it is difficult for me to see the increasing hardship confronting Iranians each day. The Iranians I knew had a great affection for Americans. Iran had good relations with all countries, including Israel. I am also sympathetic to those who supported a change in regime following the Shah. Most people were hoping for less corruption, more freedom of expression, and the elimination of the secret police. But I can assure the readers that no on bargained for the craziness we see today - the young lady who was shot and died during the green movement for all the world to see; stories of the culture police harassing people who listen to music or attend parties; harassing young girls if their head scarf is not sufficiently Islamic. And in the midst of all this, focusing on a nuclear program that has served to drive Iran further into isolation and poverty.
    I am glad my late parents who loved Iran did not live to see this day. I weep for you, Iran.

    August 1, 2012 at 7:41 pm | Reply
  13. WeAreAllDumb

    More sanctions doesn't seem to be the best method here. The Iranian people are the ones affected most by the sanctions and by no means do they deserve it at all. The government of Iran benefits because it can just blame its numerous internal problems on the 'Western-Israeli bullies' now! If we stopped backing Israel like it's our son or daughter, that would help. I'm not saying we should forget it and cut ties, but we need to be more neutral and only back Israel militarily in a defensive way (Iran would not feel as defenseless, but would understand the U.S. could be behind Israel if it attacks Israel). In the meantime, we need to focus on our own country!

    August 1, 2012 at 7:27 pm | Reply
  14. Kyle

    It is interesting that we support Israel with arms and legs and give them nucs, and yet we dictate other countries in the world to rid their nucs. Double standard. Sadam was a bad guy and a dictator, but Mubarak(who tortured many people) of Egypt was an ally, double standdard. So it is ok for Israel who gets Billions of our Tax Payers money as aid to have nucs and kill other people???? Why have we become such a suck up to the Jews. Killing of any human is wrong regardless of religion, race, gendor..May God Bless our Beautiful USA and guide our politicians..

    August 1, 2012 at 1:54 pm | Reply
    • JOHN

      Well Kyle, i'm Canadian but I know that the U.S. has always been a strong supporter of Isreal. After WW2 great nations like mine and yours owe it to them to keep them safe. It is not only Jews in Isreal but a large Christian population!
      It wasn't your government or mine that supplied Isreal with Nucs it was France! With Irans crazy leadership for them to acquire Nucs would be destabalizing for the Middle east and would start off a new arms race.
      Isreal has every right to exist and we need to protect them and make sure of their security for decades to come! They are surrounded by enemies but because of our help they have beaten them back every time, that they have been attacked! Mubarak was an ally because he sought peace not war with Isreal. The new leadership the Muslim Brotherhood is the worst thing possible. Im sure that there are many bad things coming in the future because of them winning power. There is no double standard. There is just right ruling over the wrong! And thats the bottom line!

      August 1, 2012 at 2:38 pm | Reply
      • Karl

        We got plenty of problems at home, major problems so why in the world are we giving away billions to Isreal to kill and oppress the people of Palestine? Your logic is stupid! What benefit to us to create Isreal? It's all aobut money and power of special interest, and we not that stupid to believe such twisted logic anymore. The world has changed and gotten much more informed.

        August 1, 2012 at 3:13 pm |
  15. James

    If Iran keeps going on like this, a collapse of Iran's economy will be certain. Iran needs to move quickly to save itself. A solution is to merge with Russia. The new country can be called Russiran and will have a strong economy.

    August 1, 2012 at 1:37 pm | Reply
  16. Ben

    Interesting, considering China could create an economic crisis in the US worse than the the great depression because they own a huge portion of treasury debt. In fact, if they sit out a debt sale cycle, we're sunk as well.If we don't stop letting Israel set our priorities, we're going to suffer for a very long time.

    August 1, 2012 at 11:26 am | Reply
    • U.S. Minister of Defense

      Not entirely factual. While they do have/hold a substantial amount, it isn't nearly as apocalyptic as you make it sound. Not to mention that it is in paper dollars that they hold this debt.

      August 1, 2012 at 12:12 pm | Reply
      • James

        If US and China starts a big fight, both of them will be crippled. Russia will then become the sole superpower of the world. Russia can probably then conquer a weakened China and a weakened US altogether. 😉

        August 1, 2012 at 1:45 pm |
  17. Pat

    Russia and or China could put and immediate end to all the Iranian horse manure were China to announce they have delivered two dozen nuclear war heads to Iran and Russia the delivery vehicles. The war heads could remain under the control of China with launch codes changed frequently. Their would be no long any reason to sanction Iran and the playing field would be level making it just that much easier for Israel and the US to get along with Iran.

    August 1, 2012 at 10:18 am | Reply
    • James

      Iran should join the Russia Federation as a state, and can immediately say they have become a nuclear power. Nobody dares to bully the big brother Russia, so Iran will be forever safe. Russia sits next to Iran and can supply Iran with everything that Iran needs. Meanwhile, Russia will benefit from the vast gulf oil resources and a new coastline facing the Indian ocean.

      August 1, 2012 at 1:30 pm | Reply
      • Pete

        THey need Like Buttons on CNN

        August 1, 2012 at 2:36 pm |
      • OffTheWorldPolitics

        That's hilarious.... an Islamic republic in the Russian federation! Russia would never accept such unpredictability. Iran would become a Socialist puppet and the Mullahs would all lose their influence. Which, in reality would only serve the purposes of the west and Israel. Don't forget that Russia also has its own extremism problems in Chechnya. They are not going to take the chance of Iran turning on them, and using a nuclear weapon against their people. Any way you slice it, it's regime change. Iranian people want modernity, take responsibility!

        August 1, 2012 at 4:41 pm |
    • Jeff

      Why would they? This situation puts China and Russia in a position of strength when dealing with Iran. Both regularly help embargoed countries cheat sanctions by trading "secretly" while the UN pretends not to notice. They can low-ball Iran for oil, trading outdated military hardware or paying a pittance.

      August 1, 2012 at 1:35 pm | Reply
    • DanRyanMan

      too much XBOX game lately?

      August 1, 2012 at 7:04 pm | Reply
  18. michaelfury

    August 1, 2012 at 7:47 am | Reply
  19. saeed

    at least china and iran got banks every bank in usa and britain is bankcrupt let the usa and britain sanction as much has they want they dont produce anything anyway. what do you think that a country cant live without mcdonalds or coka cola.

    August 1, 2012 at 4:07 am | Reply
    • saeedTheTowelHead

      Baaaaaaaaah, Baaaaaaaaaaah, Baaaaaaaaaaaah, Daaaaaaaaaaddy?

      August 1, 2012 at 9:49 am | Reply
    • wang chung

      Commercial and savings banks covered by FDIC insurance booked a combined profit of $35.3 billion in the first quarter of 2012, up 22.9% from a year earlier, though loan balances declined 0.8%, or $56.3 billion, after expanding for three straight quarter (Forbes) Shut-up and read a book.

      August 1, 2012 at 10:01 am | Reply
    • Spence

      Yes I listen to you, a person who can't even spell COKE-A-COLA correctly. Shut up. Your as bad as the people that believe every country should have nukes.

      August 1, 2012 at 11:09 am | Reply
      • Jeff

        That seems to make two who can't spell. It's "Coca Cola", oh Prince of Irony.

        August 1, 2012 at 1:38 pm |
      • Jeff

        Also, it's "You're as bad", not "Your".

        August 1, 2012 at 1:39 pm |
  20. Everett Wallace

    alright lucifer and gabriel send the best you have to the united states including yourselves, no more spirit game you lost now I am going to put you all to the test now, I eat pork what do you moooslims eat sh.... I know you all are perfect. I have no military it is just me, the holyspirt and the holyghost- alias tartus, so let's do this ME and my 2 BROTHERS against all you have. GALALIENS are my fiery tornadoes 2 F5's or 1 F10 your choice, told you I did not need no military, the Earth is my inheritence not the people, cars, buildings, gold, or even money, I have the HEAVENLY FATHER and HE is the only one that pays ME not men or women or devils. HE says Heaven is HIS throne and the Earth is HIS footstool. told you allah was dead and there never was a profit mohammad. the ark of the covenant is worthless it is just a wooden box to US>

    August 1, 2012 at 12:24 am | Reply
  21. Killer O'Bama

    Those news sanctions that I signed into law will stand no matter how many people suffer as a direct result from them! Besides, only a complete idiot would still believe that I gave a hoot about human misery. The bottom line is that the West needs Iran's oil and that's all there is to it!!!!!!!!!

    August 1, 2012 at 12:16 am | Reply
    • W

      to Killer

      west does not need iranian oil. US hasn't done any oil business with Iran since the the 70's...educate yourself.

      August 1, 2012 at 1:19 pm | Reply
  22. OffTheWorldPolitics

    What is going to happen if Iran suddenly tests a nuclear weapon? That is the million dollar question....

    July 31, 2012 at 8:51 pm | Reply
    • Sodomite

      Well, first of all they don't have one. Now, in the unlikelihood that they should acquire and test one – then they'll simply be setting themselves up for an @ss-whipping, much to the delight of neocons and warvangelicals.

      July 31, 2012 at 11:28 pm | Reply
      • JackFlapped

        And you know this how? North Korea tested a nuclear weapon and it didn't get an "A$$whoopin." I suppose you would rather take the chance of facing a nuclear war as opposed to a none nuclear war. Be honest, you would just stay on your sofa eating your potato chips and playing Call of Duty....

        August 1, 2012 at 12:52 am |
      • Sodomite

        North korea borders China. Iran doesn't. Stay ignorant and un-informed. Stay Amerikan.

        August 1, 2012 at 11:01 am |
    • Righteous

      I personally am interested in seeing how china is going to react to the sanction...

      August 1, 2012 at 12:09 am | Reply
      • DanRyanMan

        It is a tiny, tiny bank owned by a Chinese Natural Gas and oil company near Chinese border with some former Russian state. They provide oil-related L.C. This bank has little overseas banking expect some in Middle East.

        August 1, 2012 at 7:08 pm |

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