The latest move came Tuesday when the US Treasury Department blacklisted Iran’s fifth largest bank, Bank Sepah, for allegedly helping finance the country’s illicit weapons programs.
The move bars the state-owned bank from carrying out transactions in US dollars — a step which has wide implications in an interlocking global financial system heavily dependent on the US currency.
The impact swiftly spread to Europe, where Germany’s second biggest bank, Commerzbank, announced Wednesday that it would stop handling dollar transactions for Iranian clients, though it would continue dealings in euros.
US officials said other international banks and businesses were also reassessing the wisdom of doing business with Iran, which was slapped with limited UN sanctions last month for refusing demands to suspend its nuclear enrichment program — a possible step towards development of atomic weapons.
"Some financial institutions and other organizations are making a pretty dry-eyed assessment as to whether now is the right moment for them to be involved with" Iran, said State Department deputy spokesman Tom Casey.
"And if Iran continues down this path, then there may be further measures that will be taken against them," he told reporters Wednesday.
The UN sanctions were unanimously adopted by the Security Council, but only after months of difficult negotiations in which Russia and China — both key economic partners of Iran — succeeded in greatly watering down the measures.
The final sanctions package banned sales to Iran of materials and technology that could contribute to its nuclear and missile programs and froze the assets of 10 Iranian firms and 12 individuals linked to those sectors.
But it stopped short of more sweeping steps sought by Washington to isolate Iran.
Casey said this week’s action against Bank Sepah fell under the terms of the UN resolution, but so far US allies in Europe, Asia and the Gulf have viewed the resolution more narrowly and not followed suit with similar financial restrictions.
Frustrated with the laborious pace of UN negotiations and the world body’s uneven record in implementing sanctions, Washington already took action in September against another Iranian bank, Saderat, citing its alleged support for terrorism.
At the same time, senior US officials led by Secretary of State Condoleezza Rice and Treasury Secretary Henry Paulson were pressing allies to take financial action against Iranian firms allegedly involved in illicit activities.
"Over the past several months we have been sharing information with our foreign counterparts and key executives in the private sector about these deceptive practices and discussing how best to safeguard the international financial system against them," Treasury Undersecretary Stuart Levey said.
Underlying the message, was a tacit warning that foreign banks and companies could eventually lose access to the US financial system if found to be dealing with Iranian interests linked to terrorism or weapons proliferation.
Such leverage effectively extends the reach of the US measures against Iran into other countries which may not otherwise have chosen to take such action — as witnessed by the decisions of several major foreign banks to restrict or cut off business with Tehran in recent months, officials said.
Similar US steps against a Macau bank accused of money-laundering and circulating couterfeit US currency on behalf of North Korea had the same kind of knock-on effect and was credited with helping entice Pyongyang back into nuclear disarmament negotiations late last year.
There have also been some signs that the pressure is beginning to fuel unease in Iran with the hardline regime of President Mahmoud Ahmadinejad.
Two conservative newspapers ran editorials Wednesday complaining that Ahmadinejad’s unyielding and confrontational approach had led to the UN sanctions.
"I don’t think the Iranian people think that being isolated from the rest of the world, being further cut off and being under sanctions is something they want to see happen," remarked the State Department’s Casey.