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U.S. Treasury warns Iran may face sanctions

WASHINGTON (Reuters) - Iran may face sweeping sanctions from the rest of the world if it fails to demonstrate that it is not seeking to build nuclear weapons, a senior U.S. Treasury Department official said on Tuesday.

“The plan we are developing is comprehensive,” Stuart Levey, Treasury’s under secretary for terrorism and financial intelligence, said in prepared testimony for delivery to the Senate banking committee.

“It takes into account that no single sanction is a ‘silver bullet’ -- we will need to impose measures simultaneously in many different forms in order to be effective,” Levey said.

President Barack Obama has warned Iran to come clean about its nuclear program, which Washington fears is a cover to build atomic weapons, or face “sanctions that bite.” Tehran says its program is designed only to produce electricity.

Iran last week agreed with six world powers -- the United States, Russia, China, Britain, France and Germany -- to allow inspectors access to its newly disclosed uranium enrichment plant near the holy city of Qom.

The disclosure of the plant -- it is the second such facility acknowledged by Iran -- has prompted Washington to take a closer look at possible sanctions in the standoff.

Levey said that by targeting “key vulnerabilities and fissures in Iran,” allies could if necessary show the Iranian government that it would face “serious costs” for failing to cooperate with the international community.

The Treasury official was not specific and said he could not describe everything that was being planned at a public hearing, but he added that any measures would be taken with international cooperation.

Publicly, officials are reluctant to discuss the steps they are considering, wary of creating an impression that they view diplomacy as merely a smokescreen for eventual sanctions.

SANCTION OPTIONS

The White House is being urged to consider a wide range of options, including choking off gasoline supplies, although experts stress that is no “silver bullet” and must be part of a battery of measures.

U.S. officials are also looking at ways to discourage big financial firms from providing insurance for shipments to Iran.

“Because financial measures are most effective when imposed as part of a broad-based effort with support of the largest possible international coalition, we are working closely with our allies as we put together this strategy,” Levey said.

Levey noted that Obama had stated that, while talks with Iran in Geneva last week were helpful, the United States was not prepared to negotiate indefinitely and was prepared to move toward increased pressure if Iran does not cooperate.

Speaking to the same committee, Deputy Secretary of State James Steinberg argued strongly for engagement with Iran.

He denied the United States was engaging in “talking for talking’s sake,” noting that “the strategy of refusing to engage failed to achieve our vital goals.”

Editing by Paul Simao

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