Following an extended game of chicken, the Obama administration is granting China and Singapore exemptions from the Iranian oil sanctions, senior White House officials said Thursday.

The U.S. will also step up its surveillance of financial institutions to prevent any relations with the Iranian Central Bank. Financial institutions conducting business with Iran could be subject to U.S. sanctions in their own right, although the consequences for defiance are not clear at this time. The SWIFT system for global financial transactions has already banned Iranian banks.

Under the breaks granted to China and Singapore, the two Asian nations will still be allowed to import Iranian oil without penalties for an additional 180 days, albeit at a reduced level. The decision to grant China an exception came following a recent disclosure by the Chinese government that it had cut Iranian oil consumption by 25 percent year-over-year from January to May and would keep reducing its Iranian oil imports.

The Chinese said they decided to cut their Iranian oil imports not in acquiescence to the Obama administration, but because of internal economic pressures. Some have speculated that China's cutback in Iranian oil is the result of pricing disputes between the two countries. Still, a White House official emphasized that China has made clear it opposes them [Iran] possessing and developing nuclear weapons.

The U.S. sanctions against Iran aim to cut funding for its suspected nuclear weapons program by stripping it of financial resources, especially all-important oil revenue. Likewise, banks around the world will now be scrutinized to ensure they are not enabling the Iranian Central Bank to do business or helping to supply the Iranians with material goods or funds to assist in oil production or export. Financial sanctions against Iran have been particularly effective, White House officials assert. The Iranian economy is significantly underperforming, one official said.

The Iranian currency, the rial, has lost 40 percent of its value since December and unemployment rising. White House officials said the U.S. would continue monitoring extremely closely financial institutions around the world.

Iranian oil consumption by European Union nations will be reduced to zero by the beginning of July, and the Obama administration hopes to continue ratcheting up the pressure on the Iranians. The sanctions have already resulted in a 30 percent reduction in sales of Iranian oil, and senior administration officials said the U.S. is closely monitoring the oil market and reserves to prevent Iran from making up lost revenue from prices rising as a result of supply constraints.