President Barack Obama announced new US sanctions against foreign banks that help Iran sell its oil and said the measure would add pressure on Tehran for failing to meet its international nuclear obligations.
Obama's decision came ahead of congressional votes on new sanctions intended to further strip Iran of its oil-related revenues, and drew swift condemnation from China, home to one of the targeted banks and a major buyer of Iranian oil.
The sanctions followed criticism from Republican presidential challenger Mitt Romney that the White House is failing to act strongly enough to stop Iran's suspected pursuit of a nuclear weapons. Iran says its nuclear program is for peaceful purposes.
The United States remains committed to finding a diplomatic resolution to the standoff with Tehran, but is also determined to step up the pressure, Obama said in a statement accompanying his executive order authorizing the sanctions.
"If the Iranian government continues its defiance, there should be no doubt that the United States and our partners will continue to impose increasing consequences," he said.
Obama's new sanctions target foreign banks that handle transactions for Iranian oil or handle large transactions from the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO), two key players in Iran's oil trade.
That builds on oil trade sanctions signed into law in December that prompted buyers in Japan, South Korea and India to significantly cut purchases to avoid penalties. China also cut purchases from Iran earlier this year due to a dispute over contract terms.
The new executive order has the same rules, providing "exceptions" to nations that have demonstrated significant cuts.
Obama's new order also targets China's Bank of Kunlun and Iraq's Elaf Islamic Bank for providing services to Iranian banks.
"We expect that today's action will have a significant chilling effect on the ability of Kunlun and Elaf to operate anywhere in the world," David Cohen, the Treasury Department's undersecretary for terrorism and financial intelligence told reporters.
CHINA WARNS OF CONSEQUENCES OVER SANCTIONS
China's swift and angry reaction to the U.S. sanctions highlighted its insistence that its extensive trade and energy deals with Iran should not be hurt by the nuclear stand-off.
"The U.S. has invoked domestic law to impose sanctions on a Chinese financial institution, and this is a serious violation of international rules that harms Chinese interests," Chinese Foreign Ministry spokesman Qin Gang said in a statement.
The sanctions "will have a negative effect on bilateral Sino-U.S. cooperation" Qin said, without giving details. Calls to Kulun's administrative office in Beijing were not answered.
Israeli Prime Minister Benjamin Netanyahu said this week that sanctions have not set back Iran's nuclear program "one iota" and that "a strong military threat" was also needed.
But U.S. officials argue that the sanctions are inflicting significant pain on Iran and further isolating the country.
Iran's currency has plunged since the United States and European Union first targeted its oil revenues this year, making it harder for Tehran to spend money on its nuclear program, and ramping up internal political pressures within the country, said Ben Rhodes, a national security adviser to Obama.
Iran's oil exports have also been halved due to the U.S. sanctions and an EU oil embargo that also bans most of the world's insurances firms from covering Iranian oil shipments.
Mark Dubowitz, head of the non-profit group Foundation for Defence of Democracies, which pushes for tough sanctions on Iran, welcomed the new measures. But like other sanctions advocates, he said more steps are needed to blacklist Iran's energy sector and require countries to further cut oil imports.
The U.S. Congress has pushed for more oil-linked sanctions, and on Tuesday negotiators agreed to a final package that will require the Obama administration to crack down on those who ship or insure Iranian oil cargoes, or who pay for oil using gold.
Lawmakers said they are prepared to go further if needed.
The House is expected to vote on the bill on Wednesday. A Senate vote on the sanctions is expected to happen before Congress breaks at the end of the week for an extended recess.