The Treasury Department today designated Iran's third-largest bank, Bank Tejarat, as subject to new sanctions, on the same day the EU announced a complete oil embargo of Iran.

"At a time when banks around the world are cutting off Iran and its currency is depreciating rapidly, today's action against Bank Tejarat strikes at one of Iran's few remaining access points to the international financial system," Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen said in a statement. "Today's sanction against Bank Tejarat will deepen Iran's financial isolation, make its access to hard currency even more tenuous, and further impair Iran's ability to finance its illicit nuclear program."

Bank Tejarat is being sanctioned for providing financial services to Bank Mellat, the Export Development Bank of Iran (EDBI), the Islamic Republic of Iran Shipping Lines (IRISL), and the Ministry of Defense for Armed Forces Logistics (MODAFL), all of which were previously sanctioned for the involvement in the proliferation of weapons of mass destruction.

Treasury also sanctioned Iran's Trade Capital Bank, a Minsk-based subsidiary of Bank Tejarat, bringing the total number of Iranian financial institutions under U.S. sanctions to 23, according to a Treasury Department fact sheet. Because the banks are being sanctioned under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISADA), any foreign bank that does business with these Iranian banks risks losing access to the U.S. financial system.

In its statement, Treasury accused Bank Tejarat of facilitating the movement of tens of millions of dollars to the Atomic Energy Organization of Iran (AEOI) for the purchase of uranium. Treasury also said the bank has helped other Iranian organizations circumvent sanctions, including the Islamic Revolutionary Guard Corps (IRGC).

"Iran's economic isolation seems to worsen each day as reflected in its plummeting currency, the Iranian rial," a senior Treasury official told reporters in a Monday afternoon briefing."

The official said the Iranian government is going to extraordinary lengths to prop up the rial.

"In recent weeks, the government has tried to ban the sale of Western currency. It reportedly has restricted citizens' ability to communicate by blocking text messages containing the word ‘euro' or ‘dollar.' Plainclothes police officers are reportedly patrolling the currency exchanges to enforce currency restrictions and arrest violators," the official said.

The Treasury and State Departments are also in the process of implementing the Menendez-Kirk sanctions on the Central Bank of Iran, which the official said would cause more pain for the Iranian economy.

"The economic hardship it is currently facing will only increase in the months to come, and will continue to increase as long as Iran refuses to meaningfully engage with the international community regarding its nuclear program," the official said.

A reporter asked the official when Treasury would issue the implementation rules for the new CBI sanctions. Lawmakers are concerned the rules may be crafted in a way to allow some partner countries to avoid cutting off all business with Iran.

"As soon as they are ready," the official said.

For the third time in two years, hundreds of Chinese officials are meeting with hundreds of their U.S. counterparts to discuss dozens of bilateral topics in dozens of meetings. After the first day of the two-day event, there aren't any new bilateral agreements to announce, and officials say there aren't any expected soon.

"Now more than ever, with two years of dialogues behind us, success depends on our ability to translate good words into concrete actions on the issues that matter most to our people. So as we begin this third round, we will keep that goal in clear focus," Secretary of State Hillary Clinton said in her Monday morning remarks at the opening of the U.S.-China Strategic and Economic Dialogue, which is being held at various locations in downtown Washington.

She praised the new high level participation of senior officials from China's People's Liberation Army and rattled off a long list of issues that would be discussed, including: military-to-military relations, the situation in the Middle East, the need to rebalance the global economy, Iran sanctions, the North Korean nuclear crisis, and human rights.

Vice President Joseph Biden delivered the strongest message on Chinese human rights practices in his Monday morning remarks, when he said, "We have vigorous disagreement in the area of human rights."

"We've noted our concerns about the recent crackdown in China, including attacks, arrests and the disappearance of journalists, lawyers, bloggers and artists," Biden said. "I recognize that some in China see our advocacy [on] human rights as an intrusion and Lord only knows what else.  But President Obama and I believe strongly, as does the secretary, that protecting fundamental rights and freedoms such as those enshrined in China's international commitments, as well as in China's own constitution, is the best way to promote long-term stability and prosperity of any society."

Jeffrey Bader, the recently departed senior director for Asia at the National Security Council, wrote in a Brookings Institution policy brief that the dialogue "was not conceived as a mechanism to deal with bilateral crises or to produce specific ‘deliverables,' but to develop a richer, more intensive dialogue between senior officials on the two sides than would be possible in the usual quick in-and-out visits, and to break down bureaucratic stovepipes among agencies, particularly on the Chinese side, not accustomed to coordinating effectively with each other."

On Sunday, Clinton awarded Bader the Secretary's Distinguished Service Award, standing alongside Chinese State Councilor Dai Bingguo.

Critics of the Obama administration's China policy see the event as yet another example of the administration placing style over substance, and raising expectations of progress in the U.S.-China relationship without delivering results.

"By far the most important economic issue for America and China is the related imbalances in our economies," wrote the Heritage Foundation's Derek Scissors. "The U.S. recognized this several years ago and has repeatedly raised the matter. Result: Both economies are now more imbalanced than when the dialogue began. The main reason is simple: Neither country wants to bear the pain of rebalancing. Instead, they take to telling the other side why it should rebalance."

A senior administration official, speaking to reporters after the conclusion of the first day's meetings, said that the primary discussion of tough economic issues will be held on Tuesday.

"Tomorrow the focus is on how the U.S. and China can rebalance our economies so we can strengthen our recoveries. Monetary and exchange rate policies are certainly be a focus of those discussions," the official said. But he warned not expect any major announcements. "[The Chinese currency] is not moving enough and no one's satisfied, but it's appreciated more than 5 percent against the dollar [over the last year]," he noted.

Undersecretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats took the Chinese to task for their policy of giving regulatory, financial, and legislative support to state-owned enterprises.

"The biggest challenge in addressing these issues effectively is forging a common understanding that state-controlled competition is not competition, and that competitiveness cannot be bestowed by decree. The trade distortions created by the ‘China Model' are disadvantageous to our U.S. companies trying to compete for opportunities around the world, and a direct threat to U.S. jobs and competitiveness," Hormats said.

And Deputy Secretary of State James Steinberg told an audience at the Center for Strategic and International Studies on Monday afternoon that climate change, specifically short-term climate change forces, was a major topic of discussion between Energy Secretary Stephen Chu and his Chinese counterparts.

As for the military component of the talks, Assistant Secretary of State Kurt Campbell told reporters last week that the United States intends to engage "not just traditional players in the Foreign Ministry but also other players in the Chinese government, including the military."

Dan Blumenthal, a former China desk officer at the Pentagon and now a senior fellow at the American Enterprise Institute, said that while increased military dialogue and the building of relationships is good, the administration must not depend on such dialogue to halt the growing tension in the bilateral security relationship.

"The Chinese are moving very cautiously, the political leadership in China is very adverse to making any bold decisions, and the PLA has very little interest in talking to us about anything of substance," he said. "The summits matter less than what we are doing on the ground in response to what China is doing."

The State Department confirmed that it is engaged in an intensive effort to assist over three dozen embassies in Washington who are all facing the possible closing of their U.S. bank accounts due to a growing movement by several major banks to drop embassies from their rolls.

The embassy of Angola in Washington was the first foreign embassy to have all of its U.S. bank accounts closed against its will. Bank of America closed all five of its accounts Nov. 9, after warning the Angolans of the decision through an unsigned letter only a week before with no explanation whatsoever, according to an Angolan diplomat speaking with The Cable. The State Department is working furiously to resolve the issue -- but if it doesn't succeed, the Angolan government is considering taking action against U.S. diplomats and businesses in Angola in retribution.

The Angolans have been imploring the State Department to help them sort through the problem, and as of Nov. 9 can no longer conduct regular embassy business, such as paying bills and salaries. They even cancelled their planned Nov. 16 event celebrating the 35th anniversary of their country's independence. The State and Treasury Departments have been trying to help, but have taken the position that the U.S. government has no ability to force American banks to do business with the Angolan government.

"It's not just an Africa issue, it's an issue with missions from around the world," said a State Department official, speaking to The Cable on background. "We're aware that some banks are looking to reduce their involvement with this type of business… But the U.S. government does not control U.S. banks. We cannot require them to maintain accounts with any client." 

The official said that up to 37 embassies in Washington could soon face a similar situation, as various banks are moving to get rid of their accounts. Seventeen of those embassies represent countries in Africa. The official declined to identify the names of the other foreign embassies affected or the names of other U.S. banks moving to drop embassy business.

The Angolans, frustrated and running out of options, are considering reciprocity measures, such as closing the bank accounts of the U.S. embassy in Angola, refusing to receive the credentials of incoming U.S. Ambassador Christopher McMullen, or closing the banks accounts of U.S. companies in Angola, such as Chevron, Exxon, BP, and Boeing, according to a source in the American business community with interests in Angola and who is closely monitoring the crisis.

"We don't know why it is happening," the Angolan diplomat said. "In the context of the Vienna Convention, we hope the American administration is going to take measures for us to operate here. The administration says that Angola is a strategic partner to the U.S., so we would like at least to be treated as a strategic partner… A diplomatic mission cannot operate anywhere without a bank account."

Article 25 of the Vienna Convention of 1961 on Diplomatic Relations states, "The receiving State shall accord full facilities for the performance of the functions of the mission."

Why are the banks running away from embassy business? According to the State Department official, several banks, including Bank of America, are calculating that the effort spent making sure government accounts are not being abused for money laundering purposes, sometimes with suspected links to terrorism, is becoming too complicated and costly to justify keeping the accounts.

"Some banks feel it's just not worth their time anymore, it's a cost of business they don't want to deal with," the State Department official said.

Assistant Secretary of State for African Affairs Johnnie Carson has had several conversations with Angolan officials about the matter and briefed Secretary of State Hillary Clinton on the crisis last week. Deputy Assistant Secretary of Treasury Daniel Glaser met with Angolan Ambassador Josefina Diakité twice before she was called back to the Angolan capital of Luanda for consultations on Nov. 16.

"The Department of State seriously regrets the inconveniences -- in some cases, very serious inconveniences -- that African embassies and others have been subjected to as a result of actions by a number of American commercial banks," Carson said in an interview Nov. 15.

The official acknowledged that the discussion of the issue inside the State Department "reaches all the way to the top," and said he was hopeful that a new bank had been found to handle the funds of the Angolan embassy, although nothing was final.

The Angolans are certainly hoping the State Department can come to their rescue. "Both countries are interested in having bilateral relations. I hope that the two governments can solve the problem," the Angolan diplomat said.

Bank of America's decision to close the Angolan embassy's accounts came only three months after their accounts with another bank, HSBC USA, were dropped as well. Our sources say the action is partly related to a February report issued by the Senate Permanent Committee on Investigations, led by Sen. Carl Levin (D-MI), which cited Angola "for an ongoing corruption problem, weak anti-money laundering (AML) controls, and a cash-intensive banking system."

Bank of America spokesman Jefferson George told The Cable, "Due to confidentiality, we can't comment on specific client relationships. In general, Bank of America Merrill Lynch is actively committed to providing banking services for the diplomatic community. This includes countries in Africa, where we have a number of clients."