WASHINGTON — Western sanctions targeting Iran's nuclear program contributed to a steep drop in Tehran's access to global sources of capital last year, the U.S. Treasury Department said in a report to Congress.
Foreign banks cut their lending exposure to Iran by the equivalent of $9.1 billion in 2012, down 53 percent, said the report, a copy of which was obtained by Reuters on Thursday.
Iran's isolation from foreign lending "means that much needed investment to support its continued economic development is scarce,'' said the report, which Congress required in the U.S. sanctions law.
Broader international sanctions against Iran and other perceived weaknesses in the investment climate in Iran also contributed to the drop, the report said. It cited lending data from the Bank of International Settlements, which promotes collaboration among central banks.
The United States and the EU have imposed sanctions on Iran that aim to choke funding to Tehran's nuclear program. The West says the program is developing nuclear weapons, a charge Tehran denies.
Iran's gross domestic product is falling "possibly by the largest margin in 25 years,'' the report added.
It did not elaborate. But the Washington based Institute for International Finance said late last year Iran's 2012 GDP was expected to shrink by 3.5 percent, from 1.2 percent positive growth in 2011, as sanctions helped slash the country's oil exports by 1 million barrels per day.
In Washington's latest effort to tighten sanctions, the Treasury said on Wednesday Iran's oil earnings would now be shackled in special accounts in countries that buy oil from the Islamic Republic. Tehran can only use the funds to buy goods from its oil customers, preventing the money from being repatriated and used on the nuclear program.
The new measures represent a "significant turning of the screw,'' a senior U.S. official said.
Still, many experts say sanctions alone are unlikely to stop Iran's nuclear program as the country has a large foreign currency reserve built up from years of high oil prices.
Last month Iran announced plans to install and operate advanced uranium enrichment machines.
Iranian crude exports in December rose to their highest level since EU sanctions took effect last July, analysts and shipping sources said last month, as strong Chinese demand and an expansion of its tanker fleet helped Tehran dodge the sanctions.