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The US is threatening severe financial penalties against any foreign companies or individuals that do business with the government agency that operates Iran's civilian nuclear programme, a move that could open new rifts among the US, Russia and Europe over how to deal with the nuclear threat posed by Iran.

President George W. Bush on Wednesday issued an executive order freezing all US assets of eight organisations in Iran, North Korea and Syria deemed to be involved in weapons proliferation, including the Iranian government's Atomic Energy Organisation of Iran (AEOI).

While most of the targeted organisations are already under US sanctions, the order provides a powerful tool to force other countries to stop all dealings with these and other entities designated as “proliferators” by Washington. The provision, modeled after those used to curb financial support for terrorist groups, gives the Treasury secretary new powers to freeze assets and block all US transactions of foreign companies deemed to have provided any support for the sanctioned organisations. “The point is to isolate and cut these organisations off from the US financial system,” said a Treasury official.

The AEOI is an executive agency of the Iranian government in charge of all aspects of the nation's civilian nuclear programme which the US alleges is a cover for weapons development. Russia is contracted to the organisation for the construction of a nuclear power plant at Bushehr in southern Iran, while Chinese and other nationals have helped the AEOI with development of Iran's nuclear mines. The International Atomic Energy Agency, the UN nuclear agency, assists it withmissions and expertise. Its scientists attend international conferences.

A White House official indicated the sanctions would not be used to stop Russia's construction of the Bushehr reactor. Under the deal with Iran, Russia will supply nuclear fuel for the reactor and take it away for reprocessing. The US official noted the “timing and scope” of the measures were discretionary. He also said the sanctions would only involve “assets of an entity flowing through the US back to AEOI”.

Asked about the possible impact on negotiations with the EU3 - France, Germany and the UK - the official said: “We hope the EU3 negotiations will produce a result that takes AEOI out of the proliferation business through the cessation and dismantlement of its enrichment related and reprocessing programmes.”

European diplomats in Washington were seeking clarification of the measures, saying they had not been consulted. They expressed concern over the consequences of extra-territorial sanctions and the possible impact on negotiations held by France, Germany and the UK with Iran on its suspected nuclear weapons programme.

Patrick Clawson, senior analyst with the Washington Institute for Near East Policy, described the executive order as an “assertive policy stance” aimed at restricting Iran's entire nuclear industry.

Copyright The Financial Times Limited 2017. All rights reserved.

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