updated 9/8/2006 3:04:39 PM ET 2006-09-08T19:04:39

The Bush administration, stepping up the pressure on Tehran, moved Friday to sever a big Iranian state-owned bank from the U.S. financial system.

Stuart Levey, the Treasury Department’s under secretary for terrorism and financial intelligence, said the government’s action is against Bank Saderat, which the United States contends is used by Iran to transfer money to terrorist groups, including Hezbollah.

While Iranian financial institutions are barred from directly accessing the U.S. financial system, they are permitted to do so indirectly through a bank in another country. The United States is closing down that avenue for Bank Saderat, a U.S. Treasury official explained. The action, which involved a change in regulations, doesn’t apply to other Iranian banks, the official said.

“Today we have cut off one of the largest Iranian state-owned banks, Bank Saderat, from the U.S. financial system,” Levey said.

It marked the administration’s latest effort to turn up the heat on Iran.

The United States wants the U.N. to impose sanctions against Iran unless the country stops enriching uranium, a key step in making nuclear weapons.

Friday’s action also is the latest step to financially clamp down on Hezbollah, which the United States says is bankrolled in large part by Iran.

The U.S. calls Lebanon-based Hezbollah a terrorist group that is suspected of involvement in terrorist attacks worldwide. The U.S. also blamed Hezbollah for triggering recent bloodshed in the Middle East involving Lebanon, Israel and the terrorist organization.

Levey said that since 2001 a Hezbollah-controlled organization, which he did not identify, received $50 million directly from Iran through Bank Saderat.

“Hezbollah has used Bank Saderat to transfer funds, sometimes in the millions of dollars, to support the activities of other terrorist organizations such as Hamas in Gaza,” Levey said. “We will no longer allow a bank like Saderat to do business in the American financial system, even indirectly.”

Levey will be traveling to Europe, where he’ll talk to government officials and business people about persuading banks and other financial institutions to stop doing business with Iran. Some banks are already rethinking their relationships with the country, he said.

“Earlier this year, the Swiss bank UBS cut off all dealing with Iran,” Levey said. “HSBC and Credit Suisse have also limited their exposure to Iranian business.”

It is a difficult decision for banks to make given Iran’s standing in the global economy, including its position as a major oil supplier, Levey acknowledged in an interview with The Associated Press last week.

“The next steps may involve sacrifice, but I think that people are beginning to recognize that the costs we face now pale in comparison to those we might face in the future if Iran does not change course,” Levey said Friday.

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