Top U.S. Treasury Official In Europe For Talks On Sanctioning Iranian Central Bank

"Iran needs to be held accountable for this plot."

That is the message being delivered this week in Europe by David Cohen -- the U.S. undersecretary of the treasury for terrorism and financial intelligence and the man responsible for overseeing sanctions against Iran -- in the wake of an alleged plot by the Persian Gulf country to assassinate Saudi Arabia's ambassador on U.S. soil.

His first stop was London, where Cohen met with British officials on October 24 to discuss potential new sanctions against Iran in response to the plot.

From there, Cohen is taking his message to Berlin, Paris, and Rome.

The potential sanctions would target the heart of Iran's financial dealings, the Central Bank of Iran (CBI), in a move that analysts suggest could have a crippling effect on the country's economy by cutting off nearly all international financial transactions.

Cohen said in London on October 24 that the sanctions would be part of the broader effort to deter Iran from pursuing nuclear capabilities. "We are going to continue to look at those financial institutions that are involved with proliferation activity for Iran and continue to try to isolate them from the international financial sector," he said.

Iran has denied any involvement in the alleged bomb-attack plot, announced by the United States on October 11, and dismissed the allegations as "meaningless."

Iran Resigned To A Strong Response

But Tehran also appeared resigned that a strong response is coming, with Iranian Foreign Minister Ali Akbar Salehi saying on October 18 that "Iran is facing the toughest political and economic sanctions in the past 32 years."

Cohen's European tour could determine whether Washington's push to blacklist the CBI has the necessary international support.

The European Union last week imposed sanctions against five individuals believed to be connected to the plot, and has warned of further steps against Iran if it fails to address concerns about its nuclear program.

During an October 13 hearing of the U.S. Senate Committee on Banking, Cohen stressed the importance of expanding U.S. sanctions already in place. "Although U.S. financial institutions are already generally prohibited from doing business with any bank in Iran, including the CBI, further U.S. action against the CBI, if it attained multilateral support, could further isolate the CBI, with a potentially powerful impact on Iran," he said.

Paris-based professor of international economic relations and Iranian economic expert Fereidoun Khavand believes targeting Iran's Central Bank, which he described as the country's "main artery" to the outside world, would be a milestone in U.S. actions against Iran.

Curtailing Iran's Financial Dealings

"It would be the last step before sanctioning Iran's oil exports," he says. "Therefore, a U.S. move against the Central Bank would be a serious jump in the long process of tensions between Tehran and Washington."

Such a step, if implemented, would have a crippling effect on Iran's economy, which relies on oil profits for as much as 80 percent of its foreign-exchange revenues.

According to Khavand, if the CBI is sanctioned, the country's financial dealings with the rest of the world will become very expensive, because Iran would have to resort to irregular transactions for oil deals.

"It doesn't mean that Iran's connections to the world would be fully cut off," he adds. "But the cost for Iran's financial dealings with the world would increase significantly."

Western sanctions against the CBI could lead to a dramatic increase in oil prices, which could have a potentially damaging effect on global markets. This, in turn, could hurt the United States and its allies, who are struggling to bring the global recession under control.

Political Bluff Or A Serious Threat?

That seems to be one of the reasons some Iranian officials have dismissed the U.S. threat as a "political bluff" and an attempt to divert U.S. public opinion from the financial crisis.

Iranian officials have publicly downplayed the threat of sanctions against the CBI, claiming that Iran has programs to counter the measure.

Last month, Central Bank Governor Mahmoud Bahmani said any government that tried to sanction the bank would be "the laughingstock of the world."

Outside the official view, some in Iran are expressing concern about the prospect of new sanctions.

Jamshid Pajouyan, an Iranian economist known as the theoretician of subsidy cuts and the head of the Competition Council, said last week that Iran should take the threat of sanctions against the CBI "seriously."

The difficult part for the United States if it decides to move ahead and sanction the Central Bank would be to get others on board, particularly countries like China, which buys oil from Iran.

Former State Department Middle East intelligence official Wayne White told RFE/RL that the United States would have to convince countries that the alleged plot was very serious and that Washington is in possession of very indisputable facts surrounding the case.

"The group that would most likely participate [in the sanctions] are the closest allies of the United States -- obviously the U.K., Japan also very likely, and some of the continental powers such as France," White said.

"But as far as the Chinese and the Russians are concerned, rule them out. Doing this is contrary to their considerable interests in Iran, and the U.S. has never been able to share with them the extent of the intelligence it shares with its very, very closely guarded ally group."

Washington announced last week that it has dispatched interagency teams to a number of countries, including Russia, China, and Turkey, to provide more details about the plot.