U.S. imposes sanctions on banks dealing with Iran

By Laura MacInnis

HONOLULU (Reuters) - President Barack Obama signed into law on Saturday a defense funding bill 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 two- to six-month 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 U.S. 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 U.S. 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 U.S. official told Reuters.

Iran's central bank is the main conduit for Tehran'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 U.S. officials said Washington was consulting with its foreign partners to ensure the new sanctions can work without harming global energy markets. They stressed the U.S. strategy of both isolating and remaining open to engagement with Iran was unchanged.