U.S. lawmakers seek to further isolate Iran with sanctions

(Reuters) - U.S. lawmakers will introduce a bill on Wednesday that expands economic penalties against Iran and is designed to force countries like China to buy less Iranian crude oil, according to a copy of the legislation obtained by Reuters on Tuesday.

The bill is the latest attempt by members of the U.S. Congress to stop the Iranian government from enriching uranium to a level that could be used in weapons. It comes as Iran and six major powers meet in Almaty, Kazakhstan, to discuss Tehran's nuclear program.

The legislation by House Foreign Affairs Committee Chairman Republican Ed Royce of California and the panel's top Democrat Eliot Engel of New York builds on existing U.S. sanctions that have so far led to the devaluation of Iran's currency and slashed the country's main source of funding - oil revenues.

The bill would give U.S. President Barack Obama additional authorities to impose financial penalties on foreign companies and entities that provide Iran with goods that are critical to its economy.

The legislation would also make it harder for Iran to get the resources needed to develop its nuclear program, by cutting off Tehran's access to hard currencies such as the euro.

Under the legislation, pressure would be applied on European authorities to stop the Iranian government from using the European Central Bank's payment system to circumvent U.S. and European sanctions.

"The bill tightens the screws on Iran by several more turns," said one person familiar with the legislation.

OIL PURCHASES

Current U.S. sanctions have already forced China, India, Japan and Iran's other major oil buyers to reduce their purchases from the Islamic government.

The U.S. sanctions and a EU embargo on Iranian oil have curbed Iran's oil exports and cost Iran up to $5 billion a month, according to U.S. officials.

But lawmakers want tougher enforcement and oversight of the law that allows the Obama administration to give countries a waiver from U.S. sanctions if they reduce their consumption of Iranian oil.

The House bill would close what lawmakers deem as loopholes in the law and force countries to reduce their Iranian oil purchases over a shorter time period. As well, the legislation would prohibit countries from purchasing Iranian oil from third parties.

On Tuesday, it was unclear whether the bill would advance in Congress. But typically, bills that bolster sanctions against Iran enjoy robust bipartisan support on Capitol Hill.

(Reporting by Rachelle Younglai; Editing by Lisa Shumaker)