While the U.S. has thus far been wary of jeopardising ties with nations such as India and managed carefully its Iran sanctions regime to this end, President Barack Obama appeared to adopt a different tack this week and announced a decision to impose sanctions on any institution that his administration suspected of engaging in trade with Iran – including Chinese banks.

In pursuit of its goal to steadily tighten the economic noose around Iran’s oil export industry, Mr. Obama announced this week that his government would — over and above the National Defence Authorisation Act sanctions already imposed — add a further layer of punitive regulation targeting those who continued to maintain ties with Iran.

Specifically, the White House named the Bank of Kunlun in China and Elaf Islamic Bank in Iraq as institutions that would be cut off from transactions with U.S. institutions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), as they were said to “knowingly enable financial transactions for designated Iranian banks”.

Even as Mr. Obama said in a formal statement these two banks were being punished for facilitating “transactions worth millions of dollars” on behalf of sanctioned Iranian banks, China immediately hit back with Foreign Ministry spokesman Qin Gang quoted as saying the sanctions “badly violate rules governing international relations and hurt China’s interests”. He added that China was “strongly dissatisfied, is firmly opposed to it and will raise solemn representations to the U.S. from both Beijing and Washington”.

The new sanctions — passed by Mr. Obama via Executive Order — in particular target the Iranian energy and petrochemical sectors. They do this by denying financial backing to any individual or institution seeking to do business with the National Iranian Oil Company, Naftiran Intertrade Company or the Central Bank of Iran or aid the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

“This action is designed to deter Iran from establishing payment mechanisms for the purchase of Iranian oil to circumvent existing sanctions, and utilises the existing structure of our sanctions law, including exceptions for significant reductions in the purchase of Iranian oil,” said Mr. Obama in a formal statement.

Earlier this year India, China and a host of other nations were handed “exceptions” from NDAA sanctions by Secretary of State Hillary Clinton, after they were said to have demonstrably cut down their oil imports from Iran. The India exception came days ahead of External Affairs Minister S.M. Krishna engaging with Ms. Clinton in talks during the India-U.S. Strategic Dialogue in June.

At the time, a senior administration official briefing on China’s view on the U.S.’ Iran sanctions said, “We may have different perceptions of sanctions at different times, but one of the things that has been very important is that China has agreed to this dual-track process of pressure as well as persuasion.”

The announcement of the sanctions came even as Defence Secretary Leon Panetta and Israeli Prime Minister Benjamin Netanyahu met in Jerusalem and appeared to disagree on the effectiveness of sanctions, a question of “timing and tactics”, according to the Pentagon.

Even as Mr. Panetta attempted to persuade Mr. Netanyahu that the U.S. “will not allow Iran to develop a nuclear weapon,” the Israeli leader retorted, “Neither sanctions nor diplomacy have yet had any impact on Iran’s nuclear weapons programme.”

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