The Bush administration said Friday it is cutting off a major Iranian bank from having any dealings with U.S. banks because of alleged links to terrorism. The action came as administration officials reported progress in diplomatic efforts to sanction Iran over its nuclear program.

The Treasury Department action effectively bars the Iranian state-owned bank Saderat from having any dealings with the American financial system because of what U.S. officials say is the bank's role as a conduit of Iranian money to Middle East terrorists.

Treasury Undersecretary for Terrorism and Financial Intelligence Stuart Levey said in a written statement, the bank, one of Iran's largest, has transferred hundreds-of-millions of dollars to groups like Hezbollah, Hamas and Palestinian Islamic Jihad.

The effort to tighten financial curbs on Iran is in parallel with a diplomatic push to get the U.N. Security Council to sanction Iran over its nuclear program, which U.S. officials believe has a covert weapons component.

Senior diplomats of the five permanent Security Council member countries and Germany held what the State Department called a productive meeting on possible sanctions Thursday in Berlin. The six political directors confer again by telephone Monday, after which U.S. officials say they expect the Security Council to begin work on a sanctions resolution.

At a news briefing, State Department Spokesman Sean McCormack said the move against the bank is an example of the levers available to try to effect change in the behavior of the Tehran government, as opposed to causing harm to Iranian citizens:

"We don't want to punish the Iranian people," he said. "That's not our objective in taking these steps. That's not our objective in seeking to work through the Security Council. Our objective is to get the Iranian regime to change its behavior. And, unfortunately, it is that regime that is taking the Iranian people down a pathway of greater isolation."

Russia and China have expressed reluctance to sanction Iran, while France signaled flexibility Thursday on the demand that Iran suspend uranium enrichment before negotiations begin.

Spokesman McCormack said the Bush administration expects a hard-fought debate in the Security Council, but believes, in the end, that the major powers will follow through on their agreement to impose sanctions, if Iran does not cooperate.

On a related issue, McCormack said the U.S. mission to the United Nations has received an application for Iranian President Mahmoud Ahmadinejad to come to New York later this month to address the U.N. General Assembly.

He said no decision had been made on whether to grant a visa, but said consideration will be guided by U.S. obligations, as the United Nations host country, to facilitate visits by foreign leaders.

Mr. Ahmadinejad attended last year's General Assembly, and gave an address defending his country's nominally-peaceful nuclear program as a sovereign right.

Former Iranian President Mohamad Khatami is currently in the United States on a private visit, and at a Washington event Thursday he called for an end to what he termed the language of threat with regard to Iran and its nuclear program.

In a response here, Spokesman McCormack said any renunciation of threats should begin with the rhetoric of President Ahmadinejad:

"I think the place to start when talking about the discourse of threats is with his own president, President Ahmadinejad, in threatening to wipe the state of Israel off the map," he said. "So, I think that, again, the discourse of confrontation or threat is something that is emanating from Tehran and from this regime."

McCormack said that, rather than threatening Iran, the international community has extended a hand to Tehran by offering it a pathway to having the peaceful nuclear program it says it wants.

The so-called carrots-and-sticks offer to Iran made by the major world powers in June provided various incentives, including nuclear assistance, if it ended enrichment and other activity believed weapons-related.