UK severs ties with Iranian banks

Britain has severed all ties with Iranian banks as part of a package of sanctions from the US, UK and Canada aimed at confronting Tehran's nuclear programme.

The chancellor, George Osborne, announced the measures on Monday. The unprecedented move meant all UK credit and financial institutions had to cease trading with Iran's banks from the afternoon.

"We believe that the Iranian regime's actions pose a significant threat to the UK's national security and the international community," Osborne said. "Today's announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons."

Downing Street said the move was expected to be discussed by EU foreign ministers in 10 days, and it hoped that other countries may follow the lead and intensify sanctions.

The moves follow a recent report by the International Atomic Energy Agency that suggested Iran was working on a weapons programme under the cover of a civilian energy project.

The report has renewed speculation that the stand-off could result in military strikes against Iran's nuclear installations.

Osborne said the decision to impose sanctions followed the UN nuclear agency's report, adding: "It is also a response to calls from the Financial Action Task Force (FATF) for countries to strengthen safeguards to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran."

The foreign secretary, William Hague, said that while all options remained on the table, "we are not calling for or advocating military action against Iran."

The powers invoked by Osborne were introduced as part of the Counter-Terrorism Act 2008 and allow action where it has been called for by the FATF, an international body set up to combat money laundering and terrorist financing.

In a report last month, the FATF said there was renewed urgency behind its call for action against Iran because of the country's "failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system".

The Treasury has issued six licences allowing exceptions to the ban – including humanitarian activities, small-scale remittances to support students and families and the completion of existing transactions.

In the US, an official told the Associated Press that the Obama administration would announce sanctions targeting Iranian companies, the hardline Revolutionary Guards force as well as Iran's petrochemicals sector.

Reports suggested that the US treasury department was planning to designate Iran as an area of "primary money laundering concern" but would hold back from formally sanctioning the country's central bank in order to avoid causing a sudden shock to oil prices.

The US secretary of state, Hillary Clinton, is expected to announce details of the US sanctions later on Monday.

Source: guardian.co.uk