WASHINGTON (Reuters) - The United States on Monday ratcheted up its efforts to isolate Iran for its suspected nuclear weapons program, targeting Tehran with currency and auto-sector sanctions.
President Barack Obama imposed sanctions on foreign financial institutions that conduct or facilitate significant transactions in the Iranian rial, meant to further weaken a currency that has already lost two-thirds of its dollar value since late 2011 as a result of Western sanctions.
A senior administration official said the low level of the rial was a key vulnerability for the Iranian government.
"The objective is to take aim at the rial and to make it as unusable a currency as possible, which is all part and parcel of our efforts to apply significant financial pressure on the government of Iran," the official, who spoke on condition of anonymity, said on a call with reporters.
In his ninth executive order against Iran, the president also approved sanctions against people who do business with Iran's auto sector, which the White House said was a major source of revenue for Tehran. The sanctions go into effect on July 1.
The United States and Western powers have imposed a series of economic sanctions aimed at pressuring Iran into halting what they say is a drive to build a nuclear weapon. Tehran says its nuclear program is purely for generating power and for medical devices.
Sanctions imposed by the United States and European Union halved Iran's oil exports last year, depriving the government of billions of dollars in revenue, increasing already high inflation and hitting the rial's value.
The sanctions have hurt Iran's economy, but there is little evidence they have slowed the nuclear program ahead of a presidential election in Iran next week.
Restrictions on the auto industry, which traditionally employs the most people after the oil and gas sector, also raise fears it is ordinary Iranians that will be most harmed, analysts said.
RAMPED UP SANCTIONS
Last week, the United States blacklisted eight companies in Iran's petrochemical industry, and further restrictions go into effect on July 1, with sanctions on the shipping and ship-building industries and a ban on the transfer of gold or any other precious metals to Iranian institutions and citizens.
"We hold the door open to a diplomatic solution that allows Iran to rejoin the community of nations if they meet their obligations," White House press secretary Jay Carney said in a statement. "However, Iran must understand that time is not unlimited. If the Iranian government continues down its current path, there should be no doubt that the United States and our partners will continue to impose increasing consequences."
The sanctions imposed on the rial on Monday included a ban on maintaining significant accounts outside Iran denominated in that currency. It is the first time that trade in the rial has been targeted directly for sanctions, the White House said.
In a related action, Iranian sanctions will for the first time target financial dealings with all Iranian government officials, not just officials tied to the oil industry and central bank, U.S. officials said.
U.S. sanctions on Iran have so far included an exception for natural gas exports, which flow to several close U.S. allies, including Turkey.
NEED MORE DIPLOMACY?
Critics of the sanctions say they only harden the resolve of the Iranian government to continue funding the nuclear program.
For sanctions to work, they need to be accompanied by more diplomacy, said Paul Pillar, a former CIA analyst.
"It's a fallacy to think that there is some point at which so many sanctions have been implemented that the Iranians will cry uncle," Pillar said. "They have no incentive to make concessions unless they are led to believe that concessions will bring significant sanctions relief."
Senior U.S. officials said there will be further sanctions announced in the future to pressure Iran to negotiate about its nuclear program.
Mark Dubowitz, the head of the Foundation for Defense of Democracies, which advocates tougher policies on Iran, said Washington will likely impose sanctions on the Islamic Republic's construction, engineering, and heavy machinery industries in coming weeks.
The U.S. Treasury Department in 2010 blacklisted the Khatam al Anbiya industrial conglomerate, which is involved in those industries and is controlled by the Islamic Revolutionary Guard Corps. Placing sanctions on the industries as a whole would target investments and financing for the industries by companies in foreign countries, Dubowitz said.
(Reporting by Mark Felsenthal, Anna Yukhananov and Timothy Gardner; Editing by Peter Cooney and Mohammad Zargham)