A recent report by the Congressional Research Service outlined the stakes in choking Iran's oil revenue, which could cause a shortage of currency reserves that would force Iran's currency lower and make imports prohibitively expensive. - AFP photo

WASHINGTON: Western powers responded to a damning UN report about Iran's nuclear program with a fresh batch of sanctions Monday, targeting the country's central bank and the vital energy sector.

With UN sanctions blocked by Chinese and Russian opposition, the United States, Britain and Canada rolled out measures aimed at pressing Iran to abandon its alleged nuclear weapons program.

Notably, the measures seek to limit the West's links with Iran's Central Bank -- which has been key in funneling proceeds of energy sales to Iran's government.

Iran's energy sales are thought to account for around 70 percent of the government's budget and are crucial to the broader Iranian economy.

“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,”President Barack Obama said in a written statement.

Iran can “fulfill its international obligations... or it can continue to defy its responsibilities and face even more pressure and isolation,” he said.

The announcements came in response to an International Atomic Energy Agency report two weeks ago that came the closest yet to accusing Iran outright of seeking nuclear weapons.

US Secretary of State Hillary Clinton, unveiling what she called a “significant ratcheting up of pressure on Iran,” said the United States was targeting Iran's energy sector directly for the first time.

Detailing sanctions against goods, services and technologies for the petrochemical sector, Clinton said “there have to be consequences of such behavior.”Iran, already hit with four rounds of UN sanctions, strongly denies its nuclear program is geared towards making a bomb.

In tandem, Treasury Secretary Timothy Geithner issued a warning that any firms doing business with Iran's banking sector could run the risk of funding illicit activities.

The US government named Iran as “a primary money laundering concern,” but stopped short of adopting fully blown sanctions against Iran's central bank that could strain ties with European and Asian allies.

But, Geithner warned, “financial institutions around the world should think hard about the risks of doing business with Iran.”According to former US Treasury official, Avi Jorisch, Tehran has become increasingly dependent on the central bank to clear payments for energy sales as other banks have faced sanctions.

According to leaked US diplomatic cables, Iran had sought to use the central bank to transfer payments from as far afield as South Korea, France, Britain, Spain and Italy.

Britain was the first to make the sanctions public early Monday, with finance minister George Osborne saying London was cutting links with Iranian banks.

“We are ceasing all contact between the UK financial system and the Iranian banking system,” Osborne said.

“All UK credit and financial institutions are required to cease business relationships and transactions with all Iranian banks, including the Central Bank of Iran,” said a ministry statement.

A series of announcements followed, designed to show collective resolve as the West struggles to slow Iran's nuclear march.

In Ottawa, House Leader Peter Van Loan announced measures that would “block virtually all transactions with Iran, including those with the central bank.”France went one step further, calling on international partners to impose a freeze of Iran's central banks assets and an oil embargo, but did not announce sanctions on Monday.

With speculation about a possible Israeli military strike against Iran reaching fever pitch, Paris also warned of “the added risk of a military escalation in the region.

“The consequences of which will be catastrophic for Iran and for the world.”There was a muted market reaction to the news.

Oil prices in New York and London were pushed lower by fears about debt levels in the United States and Europe, although gasoline and gas prices in New York were higher.

Some experts have cautioned that targeting the Central Bank could have a profound impact on Iran's economy and push up global energy prices at a time when Western economies are already struggling.

A recent report by the Congressional Research Service outlined the stakes in choking Iran's oil revenue, which could cause a shortage of currency reserves that would force Iran's currency lower and make imports prohibitively expensive.