In it, Washington's Treasury in effect accuses Iran's banking system, up to and including its central bank, of being complicit in money laundering associated with nuclear weapons proliferation and terrorism. The Treasury is warning banks worldwide to think twice about doing any business with 51 state-owned and seven private Iranian banks involved in foreign operations. "Through state-owned banks, the Government of Iran disguises its involvement in proliferation and terrorism activities specifically designed to evade detection," it says, accusing Bank Markazi, the central bank, of helping disguise suspect transactions and helping sanctioned commercial banks continue to do business.

The notice is being interpreted in some quarters as a prelude to a blacklisting of all Iranian banks under the US Patriot Act's Section 311 powers, requiring all American financial institutions to sever ties with them. While American banks don't do business with Iran - in Iran the only international credit card you can use is Mastercard, set up by British banks - the effect of such a ban is much wider. Banks from other countries also shy away from the sanctioned outfits, for fear of being contaminated in the eyes of American regulators. Tay Za, the pre-eminent business crony of the Burmese military regime, found this to his cost after being put on the "Specifically Designated Nationals List" of the US Treasury along with other regime figures after the suppressed popular uprising last September.

Immediately after the listing, a widely circulated email attributed to his 19-year-old son, Htet Tay Za, boasted: "[The] US bans us, we're still f--king cool in Singapore. We're sitting on the whole Burma GDP. We've got timber, gems and gas to be sold to other countries like Singapore, China, India and Russia." Not long after, a Singapore bank pulled its lines of credit to Tay Za's Air Bagan for the purchase of two Airbus jets, and his hopes of expanding the airline internationally were grounded. Although Singapore is not obliged to follow US sanctions, its banks evidently saw a risk to their US and international business from having sanctioned Burmese individuals and businesses on their books.

Earlier, in September 2005, the US Treasury applied a Section 311 listing to Macau's Banco Delta Asia for allegedly helping North Korea launder funds and pass fake $US100 bills. The ensuing run on the bank forced it to cut all business with North Korea and scared many other foreign banks away. Neither Burma nor North Korea are at all significant in world trade or financial flows. Iran is another matter, ranking as the world's fourth-biggest oil producer and exporter, and with $US125 billion ($135 billion) in its total trade, according to 2006 figures. What would happen to these oil flows and this trade if the Americans succeed in dragooning banks worldwide away from providing the finance?

Presumably some of the trade could be directed via intermediaries such as the Gulf states. But the Gulf sheikdoms are all US protectorates heavily dependent on American goodwill. Could there be a rebellion against US financial system domination, say by China, which is increasingly reliant on oil from Iran and some other countries out of Western favour?

Unlikely: so far China has not used its veto against United Nations Security Council resolutions that have steadily tightened financial sanctions on Iran. The latest, on March 3, specifically called member states to "exercise vigilance" on Iranian banks, including the two largest commercial banks, Bank Melli and Bank Saderat. A Tokyo-based financial analyst (in the always interesting website japanfocus.org), John McGlynn, said Iranian trade officials started complaining openly in December that Chinese banks were refusing to open new letters of credit. It's not another war in the Middle East, but how it affects Iran's already faltering economy and its paranoid-minded ruling clique of Revolutionary Guards and mullahs we don't know. As pressure it will be powerful, and like the atom bomb, the collateral damage could be extensive.