Seeking to escalate pressure on Iran, a bipartisan group of senators introduced legislation on Wednesday that would deny the Iranian government access to its foreign exchange reserves parked in the banks of other countries, estimated to be worth as much as $100 billion, mostly in euros.
The legislation, which has strong support, would be the first major new sanction confronting Iran since its inconclusive round of negotiations with the big powers last month on its disputed nuclear program. Despite Iran's repeated denial, the West suspects it is aiming to be able to build nuclear weapons.
The United States and the European Union have enacted a broad range of economic sanctions aimed at pressuring Iran in those negotiations, but sponsors of the legislation contend that Iran is not bargaining in good faith while it continues to enrich uranium.
Part of the reason, they say, is that Iran has been able to work around the worst effects of the sanctions by tapping its foreign currency reserves overseas, which are largely beyond the reach of current restrictions.
"Closing the foreign currency loophole in our sanctions policy is critical in our efforts to prevent Iran from acquiring a nuclear weapons capability," the sponsors, led by Senator Mark Steven Kirk, an Illinois Republican, and Senator Joe Manchin III, a West Virginia Democrat, said in a statement on the new legislation, which they called "the Iran Sanctions Loophole Elimination Act."
It would impose severe penalties on any foreign financial institution that conducts foreign exchange transactions on behalf of Iran's central bank or other Iranian entity that is already blacklisted by other sanctions. It would also be retroactive to Thursday, regardless of the passage date.
Supporters of the legislation contended it sent a significant message of bipartisan resolve to Iran at a time when the efficacy of the sanctions strategy has been increasingly called into question, largely because it has not dissuaded Iran from continuing to enrich uranium.
"The strong support the bill enjoys from Senate Democrats demonstrates that Congress does not accept the argument advanced by some that pressure should be relieved," said Mark Dubowitz, the executive director of the Foundation for Defense of Democracies, a Washington group that has advocated for more sanctions.
"It also demonstrates that the Obama administration understands that Iran cannot be allowed to exploit loopholes in international sanctions while it refuses to agree to a negotiated settlement over its nuclear program," he said.
Blocking Iran's access to billions of dollars' worth of its own money in foreign markets could cause significant complications for the country, where presidential elections are set for next month and the economy's troubles are a major issue.