Congress OKs sanctions on Iran's energy, banks

Iran's President Mahmoud Ahmadinejad attends an official meeting with Syria's Vice President Farouq al-Shara in Tehran June 22, 2010.

WASHINGTON (Reuters) - Congress on Thursday approved tough new unilateral sanctions aimed at squeezing Iran's energy and banking sectors, which could also hurt companies from other countries doing business with Tehran.

The House of Representatives passed the bill 408-8 and sent it to President Barack Obama for signing into law. The Senate had approved it 99-0 earlier in the day.

Congress wants to pressure Tehran into curbing its nuclear program, which Washington suspects is aimed at making a bomb.

U.S. lawmakers from both parties have been pushing for months to tighten U.S. sanctions on Iran. At the Obama administration's request, they held off until the U.N. Security Council and the European Union agreed on new multilateral sanctions. But the lawmakers then declared that still tougher measures were needed.

"The U.N. sanctions, though a good first step, are quite tepid. And they are tepid because there are other members of the Security Council who want to keep doing that business with Iran. ... The United States ... has to pass these unilateral sanctions," Democratic Senator Barbara Mikulski said.

The bill penalizes companies supplying Iran with gasoline as well as international banking institutions involved with Iran's Islamic Revolutionary Guard Corps, its nuclear program or what Washington calls its support for terrorist activity.

It would effectively deprive foreign banks of access to the U.S. financial system if they do business with key Iranian banks or the Revolutionary Guards.

Such banks would be "shut out of the U.S. financial system," said the bill's House author, Foreign Affairs Committee Chairman Howard Berman. He is a Democrat.

Global suppliers of gasoline to Iran could also face bans on access to the U.S. banking system, property transactions and foreign exchange in the United States. Iran depends on gasoline imports because it has insufficient refining capacity.

POSING A CHOICE

"Because of this legislation, we will be posing a choice to companies around the world. Do you want to do business with Iran, or do you want to do business with the United States?" Republican Senator John McCain said during Senate debate.

U.S. companies are already prohibited from doing business with Iran. Foreign companies with big investments in Iran's energy sector also can be sanctioned under current U.S. law. But many U.S. lawmakers say this has not been enforced.

Some companies worldwide, such as Italy's oil and gas company Eni and French energy giant Total have been backing away from business with Tehran amid the U.S. drive to isolate Iran.

But other companies are still in business with Iran or considering it. Russia's Gazprom says it is interested in developing the Azar oil field, and industry sources say China has been selling gasoline to Iran.

PRESIDENTIAL WAIVER

The Obama administration failed to get U.S. lawmakers to make blanket exemptions for countries that are cooperating with multilateral efforts to isolate Iran.

The legislation only allows the president to waive the new sanctions on companies from "cooperating" countries on a case-by-case basis, for 12 months.

But even this waiver was too lenient for some House Republicans, who worried Obama will use it.

"The many companies from China and elsewhere, rapidly building Iran's energy facilities today, will be surely exempted from these sanctions," said Representative Ed Royce. He said he would nonetheless vote for the bill.

Russia and China, which have strong economic ties with Tehran and have at times resisted sanctions, supported recent U.N. sanctions. But they fought U.S. efforts to approve tougher measures targeting Iran's energy sector.

(Editing by Deborah Charles and Xavier Briand)