The government imposed new financial sanctions on Iran on Monday, ordering all UK financial institutions to stop doing business with their Iranian counterparts and with the central bank of Iran, the Treasury said.
It said the sanctions were in response to the International Atomic Energy Agency's (IAEA) latest report on Iran, which highlighted further concerns about the possible military dimensions of Iran's nuclear programme.
Chancellor George Osborne said Iran's actions posed a serious threat to national security and the action was being taken in coordination with other countries.
This follows the International Atomic Energy Agency's report uncovering evidence of Iran's development of nuclear weapons technology. It is also a response to calls from the Financial Action Task Force for countries to strengthen safeguards to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran.
We believe the Iranian regime's actions pose a significant threat to the UK's national security and the international community. Today's announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons.
The move will prohibit UK credit and financial institutions from entering into transactions or business relationships with banks incorporated in Iran and their branches and subsidiaries.
Firms with existing transactions and business relationships with Iranian banks will also have to stop doing business with them, unless they apply for a licence to continue, the Treasury (finance ministry) said. These licences cover humanitarian activities, personal remittances and provision of some insurance and reinsurance.
The Treasury's decision builds on existing financial sanctions against Iran.
The new sanctions on OPEC-member Iran will not target oil trading, a source familiar with the terms of the sanctions said.
Earlier on Monday, Iranian Industry Minister Mehdi Ghazanfari said the West would lose out to other countries if it imposed unilateral embargoes.
Sanctions are a lose-lose game in which both side make a loss. If they don't invest in our oil projects, they will lose an appealing market, Ghazanfari told a news conference.
The comments came ahead of an expected announcement by the U.S. Treasury Department later on Monday designating Iran an area of primary money laundering concern a move allowing it to take steps to further isolate Iran's financial sector.
The U.N. Security Council has imposed four rounds of sanctions on Iran since 2006 but Russia and China oppose any further ones, leaving the United States to issue unilateral measures and pressure its allies to follow suit.
After the U.N.'s nuclear agency said last week Iran appeared to have worked on designing an atom bomb, Washington has lined up new sanctions on Iran's petrochemical industry, sources have told Reuters.
Ghazanfari said several Western countries remained major trading partners for Iran, citing Germany, Switzerland, France, Italy among the top ten countries exporting to Iran.
Britain actively discourages trade with Iran and exports to the country have dropped by almost half over the last year.
(Reporting by Fiona Shaikh, additional reporting by David Milliken; Editing by Janet Lawrence)