By Eman Abouhassira, Yasmine Ghania and Ahmed Tolba
DUBAI/CAIRO, Aug 28 (Reuters) - Iran condemned the United States' new economic sanctions on Friday as "state terrorism" while its supreme leader said he was banning acts that could harm "social cohesion" amid concern that more financial pain could spark unrest at home.
With the war now at the six-month mark, and negotiations at an impasse, President Donald Trump's administration has stepped up efforts to punish Iran financially with what it has billed
as an "economic D-Day".
The sanctions drive compounds the toll of the war on Iran's economy, where annual inflation hit 66% last month. Meanwhile, the standoff over the Strait of Hormuz — which handled a fifth of world oil supplies before the war — remains the conflict's biggest unresolved flashpoint.
Washington has warned countries to cut their business ties with Iran or face secondary sanctions, though the Treasury Department stopped short of actually imposing penalties.
Iran’s Foreign Ministry said in a statement on Friday that all countries were obligated under international law to refrain from implementing U.S. sanctions against Tehran. It branded the new U.S. measures a "crime against humanity" that put the health and livelihood of millions of civilians at serious risk.
Supreme Leader Ayatollah Mojtaba Khamenei, who was injured and has not been seen publicly since the February 28 attack that killed his father, said in a written statement on Friday that he had banned officials from "committing anything that harms social cohesion".
Within a leadership of clerical, military and civilian branches, Khamenei urged authorities to avoid any “discouraging statements that weaken national and public motivation," amid concern that more financial pressure on its war-battered economy could trigger street protests.
Khamenei called on the government to tackle the economic hardship that has been exacerbated by the war.
"There is the need to seriously address the chain of economic and livelihood challenges, such as inflation, unemployment, management of prices and the market for goods and services," Khamenei said in his statement.
Iranian President Masoud Pezeshkian told state media that foreign trade had shrunk by nearly 35% because of U.S. sanctions and a naval blockade of Iranian ports. Iran sold about 90 million barrels of oil during the short-lived memorandum of understanding that the U.S. and Iran signed in June, when Washington permitted Iranian oil sales, Pezeshkian said.
NEW MEASURES TARGET EGYPTIAN BANK
As part of Washington's economic pressure campaign targeting Iran's trading partners, the U.S. Treasury Department imposed sanctions on Egypt's Banque Misr for doing business with Tehran, proposing a rule that would cut off the bank's branches in the United Arab Emirates from dollar transactions.
Egypt's central bank said it and the foreign ministry were in contact with U.S. officials concerning the matter, adding the measure was limited to Banque Misr UAE’s U.S. dollar transactions with correspondent banks only.
Treasury officials separately issued sanctions targeting one entity based in Hong Kong and one person linked to Iran's Bank Melli, according to a notice posted on the department's website.
With the U.S. focused on its economic pressure campaign, others have sought to revive diplomatic efforts to end the war.
Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani said he had stressed during talks with Iranian leaders in Tehran on Thursday the importance of returning to the pre-war status of open shipping through the Strait of Hormuz.
Iranian Foreign Minister Abbas Araqchi on Friday described the talks with Al Thani as "creative".
Qatar, a U.S. ally, and Pakistan helped broker the June memorandum of understanding that led to a brief ceasefire before disagreements over the strait caused it to unravel.
Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said on Thursday Iran was preparing a list of conditions for reopening the strait. In the past Iran's conditions have included an end to the U.S. blockade on Iranian ports, compensation and removal of sanctions.
U.S. military commanders say American forces have cleared sea mines from the strait that had been laid months ago by Iran's Islamic Revolutionary Guard Corps.
Trump has repeatedly said the strait is open, but the Islamic Revolutionary Guard Corps' navy said in a statement that U.S. claims the strait was open "are an obvious lie," reiterating that the waterway remained closed to ships without Iranian permission.
Many vessels have opted against sailing through it because of Iranian threats. Preliminary shipping data released on Friday showed that only seven commodity vessels had transited the Strait of Hormuz on Thursday, down from 17 a day earlier and below the 10-day average of 15.
(Reporting by Eman Abouhassira, Elwely Elwelly and Parisa Hafezi in Dubai and Yasmine Ghania, Ahmed Tolba and Enas Elashray in Cairo; Writing by Daniel Trotta and Gareth Jones; Editing by Kim Coghill, Sharon Singleton and Sanjeev Miglani)
