Foreign banks that do business with Iran would be sanctioned by the U.S. NBC's Andrea Mitchell reports.
WASHINGTON -- The White House said Friday that the United States would implement tough new sanctions aimed at squeezing Iran's oil exports after President Barack Obama determined there is enough crude on world markets to take the step without harming U.S. allies.
Obama's move allows the U.S. to go forward with sanctions on foreign banks that continue to purchase oil from Iran. The sanctions aim to further isolate Iran's central bank, which processes nearly all of the Islamic Republic's oil purchases, from the global economy.
U.S. officials hope ratcheting up economic pressure will both push Iran to abandon its disputed nuclear program and convince Israel to give sanctions time to take hold before pursuing a military strike on Iran's nuclear facilities. The U.S. and allies believe that Iran is pursuing a nuclear bomb; Iran denies that.
Under a sweeping defense bill Obama signed at the end of December, he had until Friday to determine if there was enough oil supply on the world market to allow countries to cut their oil purchases from Iran.The decision was announced in a statement Friday.
The president said he based his determination on global economic conditions, the level of spare oil capacity and increased production by some countries, among other factors. He said he would keep monitoring the global market closely to ensure it can handle a reduction of oil purchases from Iran.
The law requires the president to determine every six months whether petroleum prices are low enough and production ample enough to apply the sanctions, The New York Times said. It also allows the president to waive sanctions if they threaten national security or if gas prices increase.
The national average price of gasoline rose about half a cent to $3.93 per gallon on Friday, only about a nickel less than last year's high of $3.98 a gallon, reached in May. Analysts think pump prices will top $4 a gallon nationally within the next couple of weeks, perhaps sooner. Then they could start to fall.
Tom Kloza, chief oil analyst at Oil Price Information Service has said the average pump price could climb as high as $4.25 per gallon next month, which would top the all-time record of $4.11 per gallon set in 2008. He expects the national average to hit about $4.05 per gallon by mid-April. Whether it goes any higher, or retreats, after that is unclear, he said.
U.S. officials have sought assurances that pushing countries to stop buying from Iran would not cause a further spike in prices.
That's particularly important for Obama in an election year that has seen an increasing focus on gas prices.
The congressionally mandated sanctions target foreign financial institutions that do business with Iran's central bank — barring them from operating in the U.S. to buy or sell Iranian oil. The penalties are to take effect at the end of June, around the same time Europe's embargo on Iranian oil kicks in.
Countries can still avoid the sanctions if they take steps to significantly reduce their imports before then.
Many of the countries that buy oil from Iran are U.S. allies, including several European Union nations, Japan, South Korea and India. In order to provide flexibility to countries friendly to the U.S., the sanctions bill allows the U.S. to grant waivers to nations that significantly reduce their purchases of Iranian oil.
Even before Friday's decision, the State Department announced that it would grant waivers to 10 European Union countries and Japan because of steps they have already taken to cut back on Iranian oil. An E.U. oil embargo, approved in January, is set to take effect in July.
Sen. Bob Menendez, D-N.J., who co-authored the sanctions legislation with Republican Sen. Mark Kirk of Illinois, said he welcomed Obama's support in targeting Iran's Central Bank. Menendez's office says he was also notified of the decision earlier Friday
"Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions," Menendez said in a statement.
Msnbc.com staff contributed to this report from The Associated Press.
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