Obama Freezes Iranian Government, Bank Assets in U.S.

President Barack Obama ordered a freeze on all Iranian government and financial institutions’ assets that are under U.S. jurisdiction, the White House said today.

The president cited “deceptive practices” of the Iranian central bank in hiding transactions of sanctioned parties and its failure to prevent money laundering, concluding that Iran activities pose an “unacceptable risk” to the international financial system.

Obama’s executive order follows comments by U.S. officials, such as Defense Secretary Leon Panetta, who have expressed concern that Israel may attack if international sanctions fail to stop Iran’s suspected pursuit of nuclear-weapons capability.

“The practical impact is less important than the message it sends to Iran,” Nigel Kushner, chief executive officer of Whale Rock Legal, a London-based law firm whose clients include Europeans involved in legal trade with Iran, said in a telephone interview today. “It’s a declaration of economic warfare, to the extent that it’s not already been declared,”

The order blocks all property and interests in property belonging to the Iranian government, its central bank, and all Iranian financial institutions, even those that haven’t been designated for sanctions by the U.S. Treasury Department.

Lawyers such as Kushner who specialize in Iran sanctions said the blanket freeze on Iranian government assets, including those belonging to entities not proven to be involved in illegal activities, underscores the mounting pressure on Iran.

‘Severe Reaction’ Predicted

Kushner predicted a “severe reaction by Iran” that might include further naval exercises or threats related to the Strait of Hormuz, the Persian Gulf sea passage through which one-fifth of the world’s globally traded oil transits.

Iran’s Foreign Ministry spokesman Ramin Mehmanparast couldn’t be reached to comment on the asset freeze when called at his office in Tehran after work hours.

Previously, only assets of sanctioned Iranian entities or individuals determined by the U.S. to be involved in weapons proliferation or other illicit activities were frozen.

Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a Washington policy group that has advised the administration and Congress on sanctions, called Obama’s executive order the logical next step in the “administration’s economic war on the Iranian regime.”

Dubowitz, an attorney and sanctions specialist, said that freezing assets of Iran’s central bank and its government institutions, including the National Iranian Oil Company, makes them “subject to much tougher enforcement by the U.S. government and the global financial sector.”

Obama ‘Crystal Clear’

NIOC is owned by the government of Iran and is the world’s second-largest oil company by volume produced, after the Saudi Arabian Oil Co.

David A. Harris, president of the National Jewish Democratic Council, which promotes Jewish support for Democrats, said the action today demonstrated Obama’s record of building economic and diplomatic pressure to halt any illicit nuclear activities by Iran.

This “should end any doubt about the president’s singular commitment to ensuring Iran does not obtain a nuclear weapon,” Harris said in a statement. “Obama’s record is crystal clear; he has done more than any president in history to isolate Iran and encourage Iran’s leaders to change course.”

Long-standing U.S. regulations already prohibited American citizens or entities from virtually all direct and indirect transactions involving Iran or its government, aside from those exempted under general licenses for transactions involving food, medicine, remittances and humanitarian relief.

‘Deceptive Practices’

The new measure was mandated as part of Iran sanctions legislation that was passed by Congress and signed by the president Dec. 31.

“I have determined that additional sanctions are warranted, particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran’s anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran’s activities,” Obama said in his congressional notification.

Iran, the second-largest oil producer in OPEC after Saudi Arabia, pumped about 3.545 million barrels of oil a day last month, a Bloomberg survey showed, and exported an average 2.58 million barrels a day in 2010, according to OPEC statistics. Crude for March delivery fell 93 cents to settle at $96.91 a barrel on the New York Mercantile Exchange.