U.S. targets Iran banks for money laundering

The United States has declared Iran's banking system a center for money laundering as part of a new set of sanctions against Iran to force Tehran to halt its suspected nuclear weapons program.

In addition, the West's sanctions target Iran's oil and petrochemicals industries and Iranian companies involved in nuclear procurement or enrichment activity. The U.S. declaration against the banking system is a stern warning to financial institutions around the world to think twice before doing business with Tehran.

In response Wednesday, Iran president Mahmoud Ahmadinejad said the West must prove its claims that Iran seeks to build nuclear weapons. The West, he said in a speech, "tells us, you should prove you don't have atomic bombs. How can something that doesn't exist be proved? It's nonexistent. How can we prove it?" he told thousands of people in Pakdasht, 25 miles southeast of the capital Tehran.

The U.S. action Monday was coordinated with Britain and Canada, but not with countries, such as Russia and China, that have far greater economic investments in the Islamic republic.

President Barack Obama said in statement that Iran had a choice -- come clean on its nuclear program and reap the benefits of closer economic cooperation with the world, or face even more pressure. "Iran has chosen the path of international isolation," Obama said. "As long as Iran continues down this dangerous path, the United States will continue to find ways, both in concert with our partners and through our own actions to isolate and increase the pressure upon the Iranian regime."

The new restrictions essentially amount to a piecemeal addition to dozens of American measures already in place to isolate Iran's economy, partly reflecting the need for a quick response to a UN nuclear agency report suggesting Iranian are working toward the development of atomic weapons. Release of the report two weeks ago sparked frenzied international diplomacy over how to halt the Iranian threat, including speculation in the United States, Europe and Israel on the merits of military intervention.

The larger American dilemma is twofold. After three decades of economic estrangement and escalating pressure on Tehran for its dismal human rights record and alleged support for terrorism, the United States has few tools left to coerce or penalize the Iranian regime. And Washington is unlikely to authorize a military strike anytime soon.

For the Obama administration, even the sanctions route is constrained. The United Nations has passed four rounds of global sanctions against Iran since 2006, but veto-holding nations Russia and China stand in the way of any further action. And even unilaterally, American officials have held back from blanketing all of Iran's fuel-related exports and its central bank with sanctions, for fear of spiking world oil prices and hampering the American economic recovery.