US officials concerned about unintended consequences cautiously backed sanctions against Iran's central bank to curb Tehran's nuclear aims amid pressure for such action from Congress.
"The Obama administration strongly supports increasing the pressure on Iran," the US under secretary of state for political affairs, Wendy Sherman, told the Senate Foreign Relations Committee on Thursday.
"And that includes properly designed and well-targeted sanctions against the Central Bank of Iran, appropriately timed as part of a carefully phased and sustainable policy" to make Iran toe the line on its nuclear program, she said.
Sherman and other US officials said there is a way to target the CBI but it should occur in concerted action with other countries.
The Treasury Department's David Cohen told the panel that the administration backed France which last month called on its international partners to impose a freeze of Iran's central bank assets and an oil embargo.
"We welcome French President (Nicolas) Sarkozy's call last week for a multilateral assets freeze on the CBI," said Cohen, undersecretary for terrorism and financial crimes at the treasury.
"We recognize that coordinated and focused action against the CBI could have a particularly powerful impact on Iran's access to the international financial system and its ability to access the hard currency it earns from oil sales," he said.
We "welcome the opportunity to continue to work with Congress" on such sanctions, he said.
The US Senate was expected to approve, as early as Thursday, legislation by Democratic Senator Robert Menendez and Republican Mark Kirk to cut off Iran's central bank from the global financial system.
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Their measure, an amendment to a must-pass military spending bill, would freeze the US-based assets of any financial institution that does business with the central bank.
It would apply to foreign central banks only for financial transactions for the purpose of buying or selling petroleum and petroleum products -- a step some US officials have warned could disrupt global oil markets.
To address that concern, Kirk and Menendez's measure says the sanctions would only apply if Obama determines that there is sufficient oil from other producers to avoid disrupting global markets, and enables him to waive them for four months if he determines that to be vital to US national security interests.
Sherman and Cohen repeated longstanding administration concerns about unintended consequences.
Cohen said that it is important that any action taken must "not inadvertently redound to Iran's economic benefit, and brings serious and lasting pressure to bear on Iran."
John Kerry, the Democratic chairman of the committee who is close to the administration, acknowledged the concerns.
"So what you're really saying is, this is a very blunt instrument which risks adverse reaction, as opposed to a calculated, carefully orchestrated efforts that's currently under way, and actually accomplish the very same end?"
Cohen replied: "I think that's exactly right."
And Sherman said "we all agree with the impulse, the sentiment, the objective, which is to really go at the jugular of Iran's economy."
However, she said "there is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less."