Washington warned in late 2011 Iran`s oil consumer countries that their banks would face being cut off from the U.S. financial system unless they significantly reduced purchases of Iranian oil. The EU has also cracked down on Iranian crude exports.
The Obama administration has worked with the consumer countries to find alternative oil suppliers. It has also granted waivers on the sanctions passed in late 2011 every 180 days to all 20 countries, including China, India and South Korea, in return for their significantly reducing purchases of Iran`s petroleum.
Western countries believe Iran is enriching uranium to levels that could be used in a nuclear weapon. Tehran insists the program is for generating power and for medical devices.
Washington increased pressure on Iran`s leaders in February with sanctions that aim to freeze up Tehran`s oil earnings in accounts in countries that buy the Islamic Republic`s crude.
The senior U.S. official said an assessment of the sanctions based on customs data from oil consuming countries showed $1.5 billion in Tehran`s oil revenues are piling up in the accounts, money that Iran has difficulty accessing.
"A significant portion of the Iranian government`s revenue is accumulating and will continue to sit unused in overseas accounts with no prospect of being transferred to fund future Iranian imports," except humanitarian trade, said the U.S. official, who refused to be named due to the sensitive nature of policy on sanctions.
Iran is only able to use the bulk of its currency reserves for bilateral trade with a handful of countries that import Iranian oil: China, South Korea, Japan, Turkey, and India, the source said.
The loss of earnings has been devastating to Iran`s economy. Its currency, the rial, has been devalued, and inflation and unemployment levels have soared.
Critics of the sanctions say Washington needs to increase its diplomatic efforts, as sanctions simply deepen the resolve of Iran`s leaders to keep up the nuclear program.
There are some indications Iran has slowed part of its nuclear activities. But there are also signs it has stepped up other aspects of the program.
The U.N.`s International Atomic Energy Agency this week found that Iran has plans to test about 1,000 uranium enrichment centrifuges it has completed installing, but that the planned Arak research reactor, which could yield potential bomb material, had been delayed from early next year.
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