US Senate passes sanctions on Iran central bank

The reactor building at the Russian-built Bushehr nuclear power plant in southern Iran - 26 October 2010 Iran insists its nuclear programme is for peaceful purposes only

The US Senate has unanimously approved economic sanctions on Iran targeting the country's oil industry, despite warnings the move could backfire.

The measures, passed by 100 votes to nil, would ban foreign firms from doing business with the Iranian central bank.

Before it can become law, it must be approved by the House and President Barack Obama, who is sceptical.

The effort to thwart Iran's alleged nuclear ambitions followed new EU sanctions imposed earlier on Thursday.

Meanwhile, diplomats at the Iranian embassy in London must leave Britain by Friday afternoon.

They were ordered to go after hundreds of Iranian protesters stormed the UK embassy in Tehran on Tuesday.

Oil-price rise?

In recent weeks the US has introduced sanctions against Iran's financial sector, although it has stopped short of targeting the central bank outright.

President Barack Obama has been cautious about harsher sanctions, fearing such a move could disrupt the oil markets at a time of economic uncertainty for many Americans, and alienate potential allies.

US officials have also warned that depriving global markets of Iranian exports could send oil prices sharply higher, gifting Tehran a funding boost.

UK embassy stormed in Tehran. 29 Nov 2011 The attacks on the UK embassy in Tehran has led to Iranian diplomats being expelled from the UK

Unless a compromise is reached, the president will have to decide whether to veto it.

The US has already forbidden its own banks from dealing directly with the Iranian central bank.

Under the new sanctions, drafted by Democrat Robert Menendez and Republican Mark Kirk, foreign banks that do business with Iran's central bank would be cut off from the US financial system.

The sanctions are designed to come into effect after a six-month grace period - in order to give oil markets time to factor them in.

The measures were part of a much larger $662bn (£422bn) defence bill, which also cruised through the Senate on Thursday night.

Europe's new sanctions blacklist 180 Iranian officials and firms, but do not impose an oil embargo on Iran, because some European countries are dependent on Iranian oil.

Ministers meeting in Brussels also agreed on Thursday to work on other measures targeting Iran's energy sector.

The latest round of sanctions follows a recent UN report that linked Iran with the development of a nuclear weapon.

Tehran insists its nuclear programme is strictly for civilian purposes.

Officials say the latest sanctions are not related to this week's storming of the UK embassy in Iran.

The British government says all UK diplomatic staff in Tehran have been evacuated and the embassy closed.

Iran has said it regretted the incident, which it described as "unacceptable behaviour by a small number of protesters".

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