By Babak Dehghanpisheh and Peter Graff
Firms doing business with Iran will be barred from the United States, President Donald Trump said on Tuesday, as new U.S. sanctions took effect in spite of pleas from Washington's allies.
Iran dismissed a last-minute offer from the Trump administration for talks, saying it could not negotiate while Washington had reneged on a 2015 deal to lift sanctions in return for curbs on Iran's nuclear programme.
Trump decided this year to pull out of the agreement, ignoring pleas from the other world powers that had co-sponsored the deal, including Washington's main European allies Britain, France and Germany, as well as Russia and China.
European countries, hoping to persuade Tehran to continue to respect the deal, have promised to try to lessen the blow of sanctions and to urge their firms not to pull out. But that has proven difficult: European companies have quit Iran, arguing that they cannot risk their U.S. business.
"These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!" Trump tweeted on Tuesday.
White House national security adviser John Bolton said on Monday Iran's only chance of escaping sanctions would be to take up an offer to negotiate with Trump for a tougher deal.
"If the ayatollahs want to get out from under the squeeze, they should come and sit down. The pressure will not relent while the negotiations go on," Bolton, one of the administration's main hawks on Iran, told Fox News.
On Tuesday, Bolton said the sanctions were already working, deterring European companies: “The European governments are still holding to the nuclear deal, but honestly their businesses are running from it as fast as they can so that the effect of the American sanctions really is proceeding regardless.”
REMOVE THE KNIFE
Washington accepts that Iran has complied with the terms of the 2015 deal reached under Trump's predecessor Barack Obama, but says the agreement is flawed because it is not strenuous enough. Iran says it will continue to abide by the deal for now, if other countries can help protect it from the economic impact of Washington's decision to pull out.
Tuesday's sanctions target Iran's purchases of U.S. dollars, metals trading, coal, industrial software and auto sector. Global oil prices rose on Tuesday on concern sanctions could cut world supply, although the toughest measures targetting Iran's oil exports do not take effect for four more months.
Brent crude oil futures were up 58 cents to $74.19 per barrel at 1525 GMT.
"It is a reality check that this is happening and that Iran's oil exports will be hurt when the oil sanctions hit it in November," chief commodities analyst at Commerzbank Bjarne Schieldrop said.
In a speech hours before the sanctions were due to take effect, Iran's President Hassan Rouhani rejected negotiations as long as Washington was no longer complying with the deal.
"If you stab someone with a knife and then you say you want talks, then the first thing you have to do is remove the knife," Rouhani said in a speech broadcast live on state television.
"We are always in favor of diplomacy and talks...But talks need honesty," Rouhani said.
Intelligence Minister Mahmoud Alavi said Trump's withdrawal from the deal meant there was no point negotiating, since Washington had shown it did not abide by its commitments.
"And Iran, based on past experience, has no trust in negotiating with the American government."
The nuclear deal is closely associated in Iran with Rouhani, a relative moderate who won two landslide elections on promises to open up the economy to the outside world. European countries fear that by abandoning it, Washington could undermine Rouhani and strengthen the hand of his hardline opponents.
Britain, France, Germany and the EU as a bloc said in a joint statement on Monday: "We deeply regret the reimposition of sanctions by the U.S."
Since the sanctions were initially lifted two years ago, Iranian oil exports have risen. But many Iranians have yet to see major economic improvement, and the prospect that Washington would re-impose sanctions helped drive a collapse in the value of Iran's currency this year, raising the cost of imports.
There have been protests in Iran this year against rising prices, and the security forces have responded firmly. Iran announced steps this week to make it easier to access foreign currency and said it was prosecuting an ex-central bank official for economic crimes.
"[Sanctions] will definitely make daily life harder for Iranians," said Saeed Leylaz, a Tehran-based economist and political analyst. "But if the government has a serious plan they can control the situation."
Few American companies do much business in Iran so the impact of sanctions mainly stems from Washington's ability to block European and Asian firms from trading there.
Among large European companies that have suspended plans to invest in Iran are France's oil major Total and its big carmakers PSA and Renault.
"We have ceased our already restricted activities in Iran in accordance with the applicable sanctions", said German car and truck manufacturer Daimler.
(This version of the story was refiled to remove stray word from first paragraph)
(Writing by Peter Graff; Additional reporting by Susan Heavey in Washington; Editing by Janet Lawrence and Angus MacSwan)