UK orders banks to halt Iran business

Britain ordered its financial institutions on Monday to halt all business with Iranian counterparts, including the central bank, and the United States is also expected to tighten sanctions over Tehrans nuclear programme, Reuters reports.The British move, however, will not target trade in Iranian oil, a source familiar with the sanctions said. It also appeared unlikely that the US Treasury would try to cut off the Iranian banking system entirely, a move that could disrupt global energy markets and harm the US economic recovery.Britain said the sanctions were in response to the International Atomic Energy Agencys latest report on Iran, which highlighted fresh concerns about the possible military dimensions of Tehrans nuclear programme."We believe that the Iranian regimes actions pose a significant threat to the UKs national security and the international community. Todays announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons," finance minister, George Osborne, said.In Washington, a US official said the Treasury Department planned to designate Iran as an area of "primary money laundering concern" on Monday, a move allowing it to take steps to isolate the Iranian financial sector further.Middle East analyst at the Control Risks consultancy in London, Henry Smith, said the British move might not significantly affect Irans major oil customers."It essentially delegitimises the countrys financial system but in reality it may not make that much practical difference. The Chinese, Indians and others will continue to engage, while many Western multinationals have already pulled out," he said.Smith said tighter sanctions had appeared more likely than any Western attack to knock out Irans nuclear facilities. "We wouldnt regard Israel or indeed the US as having the wherewithal to pursue the kind of military action required to destroy Iranian nuclear facilities," he said.US sanctions have already made it extremely difficult for many global oil companies and traders to obtain bank financing to trade Iranian crude, of which less than a third goes to Europe with the rest flowing to China and India.The Wall Street Journal reported earlier that the US Treasury would not formally sanction Irans central bank, in part to avoid causing a sudden shock to oil prices.
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