Obama lauds Iran oil embargo as US turns the screw

WASHINGTON (AFP) — US President Barack Obama tightened the noose on Iran's battered banking system Tuesday and lauded an EU move to choke Tehran's oil exports, amid evidence that sanctions are beginning to bite.

The administration named Bank Tejarat as the target of fresh sanctions -- severing one of the few tendons that link Iran's state-backed banks to the Western financial system.

Bank Tejarat had been one of the few state-backed financial houses not subject to sanctions, providing a possible route for cash to make its way back to the country.

But that ended amid allegations it aided Iran's weapons programs by moving tens of millions of dollars for the purchase of uranium.

The bank, Iran's third largest, is said to have around 2,000 branches in Iran and foreign offices in France and Tajikistan.

The US announcement came just hours after European Union member states slapped an embargo on Iranian oil, a substantial blow for the energy-dependant Iranian government.

"I applaud today's actions by our partners in the European Union," Obama said.

"These sanctions demonstrate once more the unity of the international community in addressing the serious threat presented by Iran's nuclear program.

"We will continue to increase the pressure unless Iran acts to change course and comply with its international obligations.

Iran denies that its nuclear program is for military purposes.

The sanctions could not come at a worse time from the government of Mahmoud Ahmadinejad, as it struggles to right an economy mired by high unemployment and poverty levels.

The Iranian currency, the rial, tumbled to a record low against the dollar on Monday, after several months of steady declines.

According to one senior Treasury official, the Iranian currency has lost over 70 percent of its value against the dollar since autumn.

"Iran's leadership appears to be desperately trying to prop up the value of the rial; in recent weeks the government has tried to ban the sale of Western currency," said the official, who asked not to be named.

"(Iran) reportedly has restricted citizens' ability to communicate by blocking text messages with the word euro or dollar. Plainclothes police officers are reportedly patrolling the currency exchanges to enforce currency restrictions and arrest violators."

A sudden acceleration in the value of the rial was seen after Obama, in December, signed into law more sanctions hitting Iran's central bank and targeting foreign firms which do business with the Islamic republic.

Oil prices rose modestly Monday after the EU embargo was announced.

New York's main contract gained $1.25 to $99.58 a barrel.

In London the price climbed 72 cents to $110.58 a barrel.