The US unveiled aggressive new sanctions against Iran on Monday, 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 Tehran’s refusal to cede ground in stalled world power talks on its nuclear program.
They were accompanied by new US warnings of a “painful” and “powerful” escalation of the sanctions regime, as US President Barack Obama seeks to convince the Islamic Republic that the price of uranium enrichment is too high.
Obama signed an executive order authorizing sanctions on foreign banks and financial institutions that make transactions in 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.
A US official said the strategy represents 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 past two years.
“The idea here is to make the rial essentially unusable outside of Iran,” the official said.
Analysts say the move by 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 Mark Dubowitz of the Foundation for Defense of Democracies.
Dubowitz said the move against the auto sector also reflected the administration’s concern that it could be used to procure “dual use” technologies for enriching uranium.
The new sanctions were announced as the campaign gathers pace ahead of June 14 elections to succeed Iranian 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 Tehran’s nuclear policy, which is controlled by Iranian Supreme Leader Ayatollah Ali Khamenei.
All presidential hopefuls — including Iranian Secretary of the Supreme National Security Council Saeed Jalili — have said the nuclear project will proceed whoever wins.
Washington has warned that it will not rule out military action against Iran’s nuclear program 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 program is purely intended for power generation.
A US official said Iran must address the international community’s concerns or “face ever more powerful sanctions, ever more painful economic hardship and ever increasing isolation.”
However, Karim Sadjadpour, an Iran analyst with the Carnegie Endowment for International Peace, said that the new measures 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.”