US intensifies pressure on Iran, sanctioning central banker

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US slaps new sanctions on Iran's central bank chief

Trump administration intensifies its financial pressure on Iran; reaction from Republican Senator James Inhofe, member of the Senate Armed Services Committee.

WASHINGTON – The United States intensified its financial pressure on Iran on Tuesday, slapping anti-terror sanctions on the head of its central bank and barring anyone around the world from doing business with him. That dealt a further blow to European hopes of salvaging the Iranian nuclear deal in the wake of President Donald Trump's withdrawal.

Valiollah Seif, the governor of the Iranian central bank, was named a "specially designated global terrorist" along with another senior official, Ali Tarzali, who works in the central bank's international division. The Treasury Department accused the men of secretly funneling millions of dollars through an Iraqi bank to help Hezbollah, the militant network that the U.S. considers a terrorist group.

Although the sanctions do not technically extend to the central bank itself, they could significantly increase Iran's isolation from the global financial system. Seif, whose role is equivalent to the Federal Reserve chairman in the U.S., oversees major financial decisions in Iran. Any transactions that involve his signature could potentially run afoul of the sanctions, creating a strong disincentive for governments or businesses considering deals involving Iran's central bank.

"The United States will not permit Iran's increasingly brazen abuse of the international financial system," Treasury Secretary Steven Mnuchin said. "The global community must remain vigilant against Iran's deceptive efforts to provide financial support to its terrorist proxies."

Typically, when the U.S. punishes individuals with sanctions, it prohibits Americans or U.S. companies from doing business with them. In this case, the U.S. chose to also impose "secondary sanctions," which also apply to non-Americans and non-U.S. companies. That means that anyone in any country who does business with Seif or Tarzali could be punished.

The latest move comes as Trump's administration, deeming the 2015 nuclear accord insufficiently tough on Iran, seeks to construct a global coalition to place enough pressure on Tehran that it comes back to the negotiating table.

Yet the European members of the international accord, livid at Trump over his withdrawal, have yet to commit to that effort. To the contrary, Britain, France and Germany are working to salvage it. Their top diplomats met Tuesday in Brussels with Iranian Foreign Minister Mohammad Javad Zarif in a bid to keep Iran from bailing.

Whether the deal can survive without the U.S. depends on whether Tehran continues to receive sufficient economic benefits by way of business with the Europeans. Not only is Trump re-imposing sanctions on Iran, but he's also threatening to take the dramatic step of punishing European businesses that don't wind down their dealing there. That has left the Europeans in the undesirable position of having to decide whether to call his bluff.

The new sanctions on central bank officials appear designed to strengthen Trump's hand, creating another avenue by which anyone doing business in Iran could risk being cut off from New York, the beating heart of the global financial system.

"Trump can use this in his arguments with Europe to deter business with Iran," said Behnam Ben Taleblu, an Iran sanctions expert at the hawkish Foundation for Defense of Democracies. "All of this is another arrow in the quiver."

There was no immediate comment Tuesday night from Iranian officials.

The sanctions were expected to be followed by additional U.S actions in coming weeks, as the Trump administration works to dismantle the main banking conduits exploited by Iran and its Revolutionary Guards to convert Iranian rials into euros or dollars. Those Western "hard currencies" can be used to fund extremist elements, such as in Lebanon and Syria.

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Seif, a career banker, became the head of Iran's Central Bank in 2013 under President Hassan Rouhani, who shepherded the nuclear deal. Seif frequently visits Washington to attend meetings of the International Monetary Fund.

He has helped guide Iran's economy through the web of previous sanctions placed on that country. In the aftermath of the 2015 international accord, in which nuclear sanctions on Iran were lifted, Seif was a prominent voice complaining that Iran was still being kept out of the global financial system and not receiving the economic benefits it was promised in exchange for curtailing its nuclear program.

In a 2016 meeting of the Council on Foreign Relations in Washington, Seif said Iran achieved "almost nothing" from the deal.

The Treasury said Seif undermined the central bank's credibility by routing millions of dollars from the Quds Force, the expeditionary unit of Iran's Revolutionary Guards, to al-Bilad Islamic Bank, which is based in Iraq. Those funds were then used to "enrich and support the violent and radical agenda of Hezbollah," Treasury said.

Al-Bilad Islamic Bank and its CEO and chairman, Aras Habib, were also hit with U.S. sanctions, as was Muhammad Qasir, who the Treasury said is a Hezbollah official who has been a "critical conduit" for transferring funds to Hezbollah. U.S. officials were reaching out Tuesday to central banks in other countries in the Middle East and Europe to inform them of the sanctions and encourage them to immediately freeze assets the bank has overseas.

Lebanon's Hezbollah, the Shiite guerrilla force, has long helped carry out Iran's foreign policy objectives in the Arabic-speaking world. Most recently, the U.S. has been concerned about the role that Hezbollah fighters are playing in Syria to help prop up President Bashar Assad. Hezbollah fought a war with Israel in 2006, and Israeli officials have been deeply concerned about the prospect of another confrontation.

Although it is rare to sanction central bank officials, the U.S. has done it before. Earlier this year, the Trump administration ordered sanctions on the deputy governor of Russia's central bank, Alexander Torshin. And in 2015, the U.S. targeted the governor of Syria's central bank.

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Associated Press writer Nasser Karimi in Tehran, Iran, contributed to this report.

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Reach Josh Lederman on Twitter at http://twitter.com/joshledermanAP

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This story has been corrected to show that the Iran sanctions expert's first name is Behnam, not Benham.