Ottawa has cut off almost all financial transactions with Tehran after Canada joined other Western nations in announcing they are targeting the flow of money to Iran in an escalation of sanctions over its nuclear program.
Britain and the United States announced Monday restrictions on financial ties that will tighten Tehran's access to global financial markets, as reports highlighting Iran's suspected nuclear-weapons program have heightened speculation that Israel and the U.S. will eventually launch military attacks on the country's nuclear sites.
French President Nicolas Sarkozy called for more, saying it is now time to apply sanctions on an "unprecedented scale," including asking the European Union and Japan to stop their substantial purchases of Iranian oil.
But it was Britain and Canada who took the most dramatic steps Monday.
Britain told its banking sector to cut off all ties to Iran's, including the country's central bank, effectively blocking Tehran's access to one of the world's major financial capitals.
Canada, a vocal critic of Iran, can't deliver that kind of sting, but it also barred financial transactions with Iran – except for those needed to comply with existing contracts, or remittances of less than $40,000 to relatives. That will make it nearly impossible to do new business with Iranian firms. The Office of the Superintendent of Financial Institutions is to post a notice Tuesday explaining the restrictions to banks.
The United States, meanwhile, declared Iran a jurisdiction of "primary money-laundering concern," placing financial dealings with the country under greater scrutiny, and adopting a new series of restrictions on business with the Iran's oil and gas sector. U.S. Secretary of State Hillary Clinton said the U.S. will launch a diplomatic push to encourage countries to buy their oil elsewhere.
"Today's actions do not exhaust our opportunities to sanction Iran," she warned.
The co-ordinated pressure from Western capitals followed a report issued two weeks ago by the International Atomic Energy Agency that found Iran's nuclear program included activities likely aimed at developing nuclear weapons. "It is yet more proof that the current regime in Tehran poses the most significant threats to global peace and security today," Foreign Affairs Minister John Baird said in a statement.
It's also a reaction to a renewed sense that a war clock is ticking.
Israeli Defence Minister Ehud Barak said Sunday that in less than a year, it will be impossible to stop Iran from having nuclear-weapons capability. That has reawakened speculation that Israel will seek to strike the sites, drawing in the United States and possibly other Western allies like Canada.
The financial sanctions, notably restrictions on dealing with Iran's central bank, will have an impact, making it more costly for the country's financial sector by forcing it to do business with other intermediaries, which could have an effect on confidence and the already troubled economy, said Houchang Hassan-Yari, a Middle East expert at the Royal Military College in Kingston.
Cutting purchases of oil would have a deeper impact, he said, although sanctions will only be debilitating if Russia and China, both cool to sanctioning Iran, join in. Japan and the European Union are both major customers for Iran's oil, but China and India are the biggest buyers.
Mr. Hassan-Yari said the new sanctions mark a significant escalation in Western pressure, though he believes the Iranian regime will only pull back from the nuclear program if its survival in power is threatened, either from domestic instability or outside attack. He believes a military conflict is possible, with dangerous implications, so pressuring countries to join sanctions is now key.
"If Israel comes to the conclusion a nuclear Iran is inevitable, they will attack," he said. "The same thing for the Americans. And the two are encouraged by a certain number of Arab countries in the region."
It's a potential conflict that would likely have a series of rippling effects. Many believe it would provoke a sharp spike in oil prices, notably because China and India will be cut off from a major supplier.
Mr. Hassan-Yari notes that Iran not only has a substantial military machine but other tools, like Iranian-backed Mideast groups such as Hezbollah that could widen the conflict with terror attacks. "It's easy to initiate a conflict, but it's extremely difficult to control it," he said.