UK warns Iran of more sanctions pain

The Guardian - Philip Hammond, the defence secretary, says Britain wants to increase pressure as public dissent in Tehran could halt regime's 'mad' nuclear scheme.

The international community should tighten the noose on Tehran to the point of threatening the Iranian regime's survival if it does not relinquish its "mad" nuclear ambitions, the defence secretary, Philip Hammond, says.

In the most forthright indication yet of the escalating sanctions policy ambitions from a senior elected western official, Hammond warned in an interview with the Observer that there would be "more pain on the streets", predicting "potentially regime-threatening disruption and dissent", which he said would pose a clear threat to the government.

His comments come before a meeting of EU ministers on 15 October, when the UK, France and Germany will push for tightening sanctions on Iran amid moves in the US to do the same. Officials have said that would include further sanctions on Iran's financial institutions and its energy sector, while moves to tighten maritime controls on Iranian shipping were also being considered.

Initiatives that have been discussed, according to Hammond and other sources, include the joint imposition by the US and the EU of a de facto trade embargo that would block all export and import transactions through Iran's banking system. Only oil-related deals are now covered by sanctions.

That would appear to confirm recent claims, including those by US senator Robert Menendez, a Democrat on the Senate banking and foreign relations committees, regarding plans for tough new US penalties on foreign banks that handle any significant transactions with the central bank of Iran.

The latest harsh language, in what senior Iranian clerics have condemned as an "economic war" on the country, comes amid the continuing collapse in the value of Iran's currency, which is blamed both on sanctions and economic mismanagement.

Hammond says there is clear evidence that existing sanctions are working by harming the Iranian economy and fracturing the leadership's unity. His depiction of a sanctions policy pushed to the brink of a regime change moment in Iran appears to mark a new departure, although he insisted that the intention was not to bring down the government.

"There is talk of a general trade embargo and of shutting down the remaining access that Iran has to international banking channels. We can definitely make the pain much greater," he said. "The only thing that is likely to budge the regime is if they see or sense an existential threat. If the level of economic pressure starts to translate into potentially regime-threatening disruption and dissent on the streets of Tehran, then they may change course."

His comments come amid evidence that the US and the EU are moving to co-ordinate a renewed assault on the Iranian economy that critics say is already hurting citizens, including an 80% rise in the price of food. Oil exports from Iran – its key source of foreign revenue – have fallen by 50% this year as evidence has emerged that the US is working behind the scenes to persuade countries such as South Korea, to which it granted an exemption to import Iranian oil, to halt or slow its imports.

South Korea is one of a number of countries to have been granted a six-month waiver by the US to import Iranian oil as long as it reduces its imports. Any new waiver, it has been suggested by US officials, would only be granted if further import cuts are agreed. In further evidence of the intense efforts behind the scenes, the last non-Iranian company prepared to insure ships carrying Iranian oil has now pulled out of offering cover.

Speaking before the Tory party conference in Birmingham, Hammond said: "There is evidence that the leadership is beginning to fracture over this question. They are beginning to turn on each other as the pain gets transmitted through. And they can end it all instantly. Their professed position is that they're enriching uranium for peaceful purposes. Nobody believes them."

Hammond insisted that no one wanted to cause any more pain for the people of Iran and made clear that the aim was not regime change; it was merely to apply as much pressure as necessary to force Iran to drop its nuclear programme. Asked if there were plans to do more, he said: "There is further tightening we can do." He added: "We can definitely make the pain much greater. Nobody wants to cause the Iranian people to suffer unnecessarily but this mad scheme to build a bomb has to be brought to an end."

Hammond's remarks do, however, appear to contradict the judgment of the US intelligence community, which has said it believes Iran has not yet made a decision to build a nuclear weapon.

Asked about the 9,000 British troops in Afghanistan, Hammond said he hoped there could be a significant reduction by the end of next year. Five hundred are due to leave by the end of this year.

By Toby Helm and Peter Beaumont