While imposing the latest sanctions, Obama said the door to diplomacy with Iran is still open[AFP]

The US president has signed a bill imposing the toughest sanctions on Iran to date, in a move designed to strike at the Islamic republic's financial and scientific establishment over its
alleged nuclear weapons programme.

The legislation, signed by Barack Obama on Thursday, aims to choke off Iran's access to refined petroleum imports including gasoline and jet fuel and bans US banks from doing business with foreign banks that
provide services to Iran's elite Revolutionary Guards.

"With these sanctions -- along with others -- we are striking at the heart of the Iranian government's ability to fund and develop its nuclear programmes," Obama said at a White House
ceremony.

The new sanctions are designed to force foreign firms to choose whether to do business with Iran or the United States.

The unilateral US sanctions were passed in addition to new United Nations Security Council sanctions on Iran, passed last month.

The UN penalties, which were signed by traditional backers like China and Russia, were meant to punish Tehran for refusing to reduce by half its uranium enrichment work, the most controversial aspect of its
atomic drive.

Mahmoud Ahmadinejad, Iran's president, said on Monday that he would postpone nuclear talks as a "penalty" for the latest UN sanctions.

Iran has said its nuclear programme is for civilian power generation, not military weapons.

'Path of defiance'

"To date, Iran has chosen the path of defiance," Obama said at the signing ceremony, where he accused Tehran of spurning offers for dialogue.

"The door to diplomacy remains open. Iran can prove that its intentions are peaceful. It can meet its obligations under the [nuclear non-proliferation treaty) and achieve the security and prosperity worthy
of a great nation," Obama said.

Facing frequent criticism from US Republicans that he is too weak on national security, Obama called the new law the "toughest sanctions against Iran ever passed by the United States congress".

The US Senate and House of Representatives approved the legislation by margins of 99-0 and 408-8 last week.

Companies that provide financing, insurance or shipping services to Iran's energy sector will also be effected.

While Iran has large oil reserves, a lack of investment has left the country producing far below its capabilities. The country also lacks refining capacity for domestic gasoline needs.

Critics have questioned whether the new law, and similar measures being adopted by Europe, will change anything given that Iran is courting investment from emerging markets.