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US sanctions have closed door to diplomatic solution, says Iran

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The sanctions against Iranian supreme leader Ayatollah Ali Khamenei deny him and his office access to financial resources.

Washington, DC

IRAN said the path to a diplomatic solution with the US had closed after the Trump administration imposed sanctions against its supreme leader and other top officials, raising tensions days after the downing of an American drone brought the Middle East to the brink of war.

President Donald Trump on Monday unveiled sanctions on Ayatollah Ali Khamenei and eight senior military commanders that deny him and his office access to financial resources. Treasury Secretary Steven Mnuchin said financial restrictions would also be introduced against Iran's Foreign Minister Javad Zarif later this week.

The Foreign Ministry spokesman Abbas Mousavi was quoted as having said: "The futile sanctions against the Iranian leader and the country's chief diplomat mean the permanent closure of the diplomatic path with the government of the United States.

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"The Trump government is in the process of destroying all the established international mechanisms for maintaining global peace and security."

Treasury futures pushed higher and most Asian stock markets slipped as increasing tensions rattled investors. Oil steadied after rallying almost 8 per cent in three days, as investors weighed mixed signals from the White House on Iran and signs that an extension of the Opec+ production cuts may not be assured.

Mr Trump last week abruptly cancelled planned air strikes against Iran for shooting down the drone. The administration also blames Tehran for recent attacks on oil tankers near the Persian Gulf.

Tensions have spiked in the Gulf since May, when the Trump administration revoked waivers on the import of Iranian oil, squeezing its economy a year after the US walked away from the landmark 2015 deal meant to prevent the Islamic Republic from developing a nuclear weapon.

Since then, a spate of attacks on oil tankers near the Strait of Hormuz shipping choke point have raised the spectre of war and pushed up oil prices.

The new penalties are unlikely to have a significant impact on a country that is already in recession due to stringent US sanctions on its oil sector; it has also been largely shut out of the global financial system.

The US has sanctioned more than 80 per cent of Iran's economy, according to Secretary of State Michael Pompeo, who is in Saudi Arabia and the United Arab Emirates this week to rally a front against Iran.

Mr Trump has coupled his "maximum pressure" campaign of sanctions with invitations to sit down with Iranian leaders. In an interview that aired Sunday on NBC's "Meet the Press", the president said he thinks Iranian leaders want to negotiate and that he is willing to talk with no preconditions except that the outcome must be Iran acquiring no nuclear weapons.

"The supreme leader of Iran is the one who ultimately is responsible for the hostile conduct of the regime," he said on Monday.

Iran has denied involvement in the tanker incidents. President Hassan Rouhani said on Tuesday that his country's airspace was a "red line" and dismissed Mr Trump's offer to talk as a "lie": "You say 'Let's talk' and then you sanction the foreign minister. This clearly shows that you're lying," he said in a speech carried live on Iranian state TV.

"Today, you get a sense from the government in the US and in the White House that there's a massive amount of confusion and frustration. The expectation they had was to tear apart the country within two or three months but they have seen it has become more resistant."

Russian Foreign Minister Sergei Lavrov warned of the danger of the "deeply personalised" sanctions against Mr Khamenei, saying events remind him of the run-up to the US invasion of Iraq in 2003.

"We're very concerned at what's going on," he told reporters in Moscow. The latest US punitive measures "send the signal that the situation is moving in a very bad direction". Russia is a signatory to the nuclear deal and an ally of Iran's in Syria's civil war.

The new restrictions serve as symbolic reprimand for the recent attacks, said former Treasury officials.

Brian O'Toole, a senior fellow at the Atlantic Council who previously worked in the US Treasury Department's sanctions unit, said: "It will have an effect because it will annoy the Iranians and make negotiations hard to pull off if their Supreme Leader is sanctioned."

At the United Nations on Monday, Iran's Ambassador Majid Takht Ravanchi ruled out one-on-one talks with the US, urging Secretary-General Antonio Guterres to help organise regional talks instead. "You cannot start dialogue with someone who is threatening you, who is intimidating you," he told reporters.

Outside a session of the Security Council called by the US - where Iran wasn't invited to participate - UK Ambassador Karen Pierce told reporters that "there's a lot of desire to see de-escalation and to look for diplomatic solutions.

"At the same time, one has to take very seriously the sorts of attacks that have occurred on the tankers, which is dangerous for international shipping, dangerous for regional security."

Mr Khamenei, who was initially elected president of the nascent republic in 1981, has "possessions" valued at an estimated $200 billion, said a Facebook post by the US embassy in Baghdad in April.

He's backed by the Islamic Revolutionary Guard Corps and has survived an assassination attempt and front-line combat.

The US Treasury Department said Monday that those sanctioned also include eight officials of the Guard Corps who supervised "malicious regional activities", including its ballistic missile programme and "harassment and sabotage" of commercial ships in international waters.

Mr Mnuchin said the US will impose financial restrictions on Mr Zarif "later this week". Typically, the US doesn't announce sanctions in advance against individuals so they don't hide assets before the penalties take effect.

Mr Zarif, regarded as Iran's most skilled diplomat, was lead negotiator in the multi-party nuclear accord reached in 2015 under the Obama administration, which Mr Trump has since rejected.

Any financial institution that knowingly assists with a financial transaction for those who were sanctioned could be cut off from the US financial system, said the Treasury. WP