Iran looks to Europe as U.S. increases sanctions

The U.S. labelled the head of Iran's central bank as a "terrorist" on Tuesday and barred anyone around the world from doing business with him, escalating financial pressure on Tehran as it turned to Europe in a bid to preserve its 2015 nuclear deal.

Valiollah Seif, the governor of the Iranian central bank, was named a "specially designated global terrorist" along with another senior official, Ali Tarzali, who works in the central bank's international division. The U.S. Treasury Department accused the men of secretly funnelling millions of dollars through an Iraqi bank to help Hezbollah, the Iran-backed militant network that the U.S.considers a terrorist group.

The moves come as President Donald Trump's administration, after deeming the nuclear deal insufficiently tough on Iran, seeks to construct a global coalition to place enough pressure on Tehran that it comes back to the negotiating table to strike a better deal.

The sanctions targeting Iran's central bank executives are some of the first actions by Trump's administration since pulling out of the deal to start ramping up that economic pressure.

"The United States will not permit Iran's increasingly brazen abuse of the international financial system," Treasury Secretary Steven Mnuchin said. "The global community must remain vigilant against Iran's deceptive efforts to provide financial support to its terrorist proxies."

The exact ramifications of the sanctions for Iran's economy were not immediately clear. The U.S. said that the sanctions did not extend to Iran's central bank itself. Still, the U.S. said it was imposing so-called secondary sanctions on the Iranian bank officials, which could significantly increase Iran's isolation from the global financial system.

Typically, when the U.S. punishesindividuals with sanctions, it prohibits Americans or U.S. companies from doing business with them. Secondary sanctions also apply to non-Americans and non-U.S. companies. That means that anyone, in any country, who does business with Seif or Tarzali could themselves be punished with sanctions, cutting them off from the U.S. financial system.

Talks in Europe

European powers, meanwhile, vowed to keepthe nuclear deal alive without the U.S. by tryingto keep Iran's oil and investment flowing, but admitted theywould struggle to provide the guarantees Tehran seeks.

British, French and German foreign ministers, along with theEU's top diplomat, discussed the next steps with their Iraniancounterpartin Brussels on Tuesday.

"We all agreed that we have a relative in intensive care andwe all want to get him or her out of intensive care as quicklyas possible," EU foreign policy chief Federica Mogherini toldreporters after the 90-minute meeting.

She said all sides had agreed to find practical solutionsover the coming weeks. Those included continuing to sell Iran'soil and gas products, maintaining effective banking transactionsand protecting European investments in Iran.

"I cannot talk about legal or economic guarantees, but I cantalk about serious, determined, immediate work from the Europeanside," Mogherini said.

Iranian Foreign Minister MohammadJavadZarifsaid earlier the talks were off to a good start.

"We are on the right track a lot will depend on what we can do in the next few weeks," he said after the meeting.

But keeping the deal alive could be difficult for its European signatories because Trump has vowed to punish European companies that continue doing business with Iran.

Web of sanctions

Seif, as the central bank's governor, has helped guide Iran's economy through the web of sanctions in place on that country. In the aftermath of the 2015 deal, in which nuclear sanctions on Iran were lifted, Seif was a prominent voice complaining that Iran was still being kept out of the global financial system and not receiving the economic benefits it was promised in exchange for curtailing its nuclear program.

The U.S. Treasury said that Seif undermined the central bank's credibility by routing millions of dollars from the Quds Force, the expeditionary unit of Iran's hard-line Revolutionary Guards, to al-Bilad Islamic Bank, which is based in Iraq. Those funds were then used to "enrich and support the violent and radical agenda of Hezbollah," the treasury said.

Al-Bilad Islamic Bank and its CEO and chairman, Aras Habib, were also hit with U.S. sanctions, as was Muhammad Qasir, who the treasury said is a Hezbollah official who has been a "critical conduit" for transferring funds to Hezbollah from the Revolutionary Guards.

Hezbollah, the powerful Shiaguerrilla force thatis based in Lebanon and is a prominent political player there, has long helped carry out Iran's foreign policy objectives in the Arabic-speaking world. Most recently, the U.S. has been concerned about the role that Hezbollah fighters are playing in Syria to help prop up President Basharal-Assad.

Hezbollah fought a war with Israel in 2006, and Israeli officials have been deeply concerned about the prospect of another confrontation.