By BRADLEY KLAPPER and MARJORIE OLSTERAssociated Press
WASHINGTON (AP) - The Obama administration will extend six-month sanctions exemptions to China, India and seven other countries for significantly reducing oil imports from Iran, officials said Tuesday, as the U.S. imposed new measures against companies believed to be acting as a front network to help the Iranian government evade international financial restrictions.
The waivers will be announced Wednesday, said the officials, who demanded anonymity because they weren't authorized to speak publicly on the matter. Banks in Malaysia, Singapore, South Africa, South Korea, Sri Lanka, Turkey and Taiwan also will be exempted from any U.S. penalties.
The Obama administration has introduced a series of new measures over the past week to step up the pressure on Iran over its nuclear program, which Washington suspects is aimed at making weapons but Iran insists is for generating electricity and medical research. Washington hopes the pressure will force Iran to come clean on its nuclear activity so that the U.S. and its allies don't have to engage in any military intervention to prevent the Islamic republic from obtaining an atomic arsenal.
Washington's most ambitious tactic has involved pressuring countries around the world to cut commercial ties with Tehran or likewise face a series of restrictions on what type of business they can conduct in the United States, the world's largest market. The U.S., however, has yet to punish any of its international trading partners since instituting Iranian petroleum sanctions last year, leading observers in Congress and elsewhere to question if the threat of American action is real.
China remains Iran's top trading partner and its No. 1 client for petroleum exports, with Japan, India and South Korea among the other top purchasers.
One U.S. official stressed that Chinese imports showed an honest decrease, especially when crude oil is accounted for in calculations.
In reality, though, it is difficult to imagine the Obama administration imposing wide-scale penalties on Chinese banks and financial institutions even if Beijing hadn't scaled back business with Tehran. Such measures would cause financial damage for both China and the United States, the world's two biggest economies, and worsen commercial friction between the powers just as Chinese President Xi Jinping prepares to visit the U.S. later this week for a summit with President Barack Obama.
Testifying Tuesday to the Senate Banking Committee, Wendy Sherman, the State Department's lead nuclear negotiator, said Iran would be high on the list of topics for Obama's meeting with Xi. She insisted U.S. pressure had already had an impact, saying Chinese trade with Iran has declined by 18 percent.
Despite plummeting sales overseas, Iran remains one of the world's largest oil producers. Its exports bring in tens of billions of dollars in revenue for the country's hardline leaders, money the U.S. is trying to cut off.
Earlier Tuesday, the U.S. issued further sanctions by blacklisting 37 companies accused of operating as a front network for Iran's leadership used to circumvent international restrictions. The Treasury Department said the companies were generating billions of dollars in profits for the Iranian regime each year.
"Even as economic conditions in Iran deteriorate, senior Iranian leaders profit from a shadowy network of off-the-books front companies," the department's sanctions chief, David S. Cohen, said in a statement. He said his department would expose efforts by Tehran to "hide billions of dollars in corporate profits earned at the expense of the Iranian people."
Testifying alongside the State Department's Sherman, Cohen cited evidence the sanctions were having an impact on Iran's leadership ahead of the country's presidential election on June 14. When Iranian nuclear negotiators met with world powers in Kazakhstan in April, he said, Tehran sought sanctions relief in exchange for nuclear concessions. "They would not have done so had the impact of sanctions not affected their calculus," he told the committee.
Still, Cohen acknowledged the sanctions have failed to change Iran's "fundamental strategic calculus," responding to several senators who noted that talks have not gotten Iran to curtail its uranium enrichment activity
On Monday, the Obama administration announced separate sanctions that for the first time directly targeted Iran's rial, going after foreign banks that purchase or sell significant amounts of the currency or who hold significant amounts in accounts outside Iran.
Officials described the move as part of the dual-track effort to offer meaningful negotiations to the Iranian regime while continually upping the economic stakes if it does not engage in serious talks. Diplomatic efforts involving the U.S. and five other world powers and Iran have repeatedly failed to address international concerns over Tehran's uranium enrichment activity, and President Barack Obama has said that the world may have less than a year left for a peaceful solution.
The alternative could be military intervention from the United States or from Israel, which sees an Iranian nuclear arsenal as an existential threat and has regularly warned that it could authorize strikes or other action to halt the Islamic republic's atomic advances.
Associated Press writer Matthew Lee contributed to this report.
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