President Obama announced new economic sanctions on Iran on Monday in a bid to raise pressure on conservative hard-liners who have vowed not to compromise with the West over Tehran's nuclear development program.
Obama, who has faced demands from Congress to tighten sanctions, issued an executive order targeting large transactions involving the Iranian currency, the rial, in overseas banks. The goal is to further undermine a currency that has lost two-thirds of its value in two years.
He also slapped sanctions on Iran's domestic auto industry, a major revenue source for the government and, U.S. experts charge, the cover for procuring industrial equipment that can be used for nuclear infrastructure.
Some current and former senior U.S. officials have begun to openly question the wisdom of increasing sanctions, arguing that they aren't persuading Iran to stop enriching uranium.
"Had Rafsanjani run, the administration may have been more reticent in using sanctions," said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, an independent group that advocates tougher sanctions. "There is now a widely held assumption in the administration that there are only hard-liners running."
The sanctions on trade in Iranian rials is intended to force foreign banks holding large amounts of the currency to dump it, "to make it as unusable a currency as possible," a senior administration official said.
Iranian elites, including senior government and military officials, maintain access to large sums in rials and use foreign banks to change the currency into dollars, euros and other denominations.
The move against the Iranian auto industry targets a sector that is believed to account for about 10% of Iran's economy, according to experts.
Dubowitz and others have argued that the auto industry, the Middle East's largest, is controlled by members of the elite paramilitary Revolutionary Guard, which has used front companies overseas to acquire carbon fiber, hardened steel and other industrial equipment needed to make the centrifuges that enrich uranium for nuclear production.