US President Barack Obama signed a defense funding bill into law on Saturday that imposes sanctions on financial institutions dealing with Iran's central bank, while allowing for exemptions to avoid upsetting energy markets.
The sanctions target both private and government-controlled banks - including central banks - and would take hold after a 60- to 180-day warning period, depending on the transactions, a senior Obama administration official said.
Under the law, the president can move to exempt institutions in a country that has significantly reduced its dealings with Iran and in situations where a waiver is in the US national security interest or otherwise necessary for energy market stability. He would need to notify Congress and waivers would be temporary, but could be extended.
Sanctioned institutions would be frozen out of US financial markets.
"Our intent is to implement this law in a timed and phased approach so that we avoid repercussions to the oil market and ensure that this damages Iran and not the rest of the world," the senior US official told Reuters. "The idea here is to reduce Iran's oil revenues."
Obama signed the bill during his vacation in Hawaii, just hours after Tehran said it had delayed planned long-range missile tests in the Gulf and signaled it was ready for fresh talks on its disputed nuclear program.
Senior US officials said Washington was consulting with its foreign partners to ensure the new sanctions can work without harming global energy markets. They stressed the US strategy of both isolating and remaining open to engagement with Iran was unchanged.
Obama did not single out the Iran sanctions in a statement the White House released about his signature, but did point to his concerns about a number of provisions in the defense bill that relate to the treatment and transfer of detainees.
"The fact that I support this bill as a whole does not mean I agree with everything in it," Obama said, suggesting limits on the ability to move terrorism suspects from the US military prison at Guantanamo Cuba to the United States for trial or to a foreign country were ill-conceived.
"The executive branch must have the flexibility to act swiftly in conducting negotiations with foreign countries regarding the circumstances of detainee transfers," he said, also calling federal courts "legitimate, effective and powerful" means by which to prosecute some militants.
Reuters reported this week that the Obama administration is considering transferring to Afghan custody a Taliban official suspected of major human rights abuses as part of a long-shot bid to improve the prospects for a peace deal in Afghanistan, a move that has set off alarm bells on Capitol Hill.
Obama also raised concerns about a requirement that he must notify Congress before sharing any classified US ballistic defense missile information with Russia.
In his statement, he said he intended to keep Congress informed of US-Russia cooperation on ballistic missile defense, he would interpret the rule in a way that does not limit his ability to conduct foreign affairs "and avoids the undue disclosure of sensitive diplomatic communications."
"Should any application of these provisions conflict with my constitutional authorities, I will treat the provisions as non-binding," he said, referring to a number of sections of the defense bill, which is hundreds of pages long.