(Adds Ilyumzhinov denial, Russian response)

By Yeganeh Torbati

WASHINGTON, Nov 25 (Reuters) - The United States sanctioned a Syrian businessman on Wednesday who it said was a middleman for oil sales between Islamic State and the Syrian government, the latest salvo in an effort to cut off the flow of funds to the militant group.

The U.S. Treasury Department said in a statement that it had also sanctioned three other individuals for providing support to the Syrian government, and businesses linked to them, including a Russian bank.

The measures, the latest round of sanctions related to the ongoing civil war in Syria, freeze any U.S. assets and prohibit Americans from transactions with the targets.

Islamic State, which has been described by U.S. officials as the wealthiest terrorist group of its kind, is believed to derive much of its funding from oil fields seized from the Syrian government. IS sells the oil through long-standing smuggling networks, experts and officials say.

The government of Syrian President Bashar al-Assad has also agreed to purchase IS oil, a Treasury official said last year.

The U.S. Treasury said it was targeting Syrian businessman George Haswani, who it said "serves as a middleman" for oil purchases by the Syrian government from Islamic State. His company, an engineering and construction firm, was also sanctioned.

The European Union sanctioned Haswani in March, and at the time, he denied the accusation that he bought oil from IS militants for the Syrian government, telling Reuters by phone that the EU had no evidence to back up the claim and should instead look for intermediaries he said were smuggling oil to Turkey on Islamic State's behalf.

The United States has used financial and military tools to target the finances of Islamic State, which this month took credit for a coordinated assault on Paris that left 130 people dead. Last month, the U.S. military launched air strikes concentrating on the group's oil facilities in Syria in a campaign dubbed "Tidal Wave II."

Defense officials estimate the group was earning $47 million in oil sales prior to October and that the campaign has reduced that amount by about 30 percent.

The U.S. sanctions also target Mudalal Khuri, who the Treasury said assisted or acted on behalf of the Syrian government, its central bank, and central bank officials, and represents Syrian government interests in Russia.

Kirsan Ilyumzhinov, who the Treasury said is a wealthy Russian businessman and president of the World Chess Federation, was also sanctioned for helping the Syrian government. Russian Financial Alliance Bank was targeted for being controlled or owned by Khuri and Ilyumzhinov.

Russian Deputy Foreign Minister Sergei Ryabokov, referring to the sanctions on Wednesday, said Washington should stop playing "geo-political games," RIA news agency reported.

Ilyumzhinov denied the U.S. Treasury's allegations, Russian news agencies also reported on Wednesday.

"I want to emphasize that I have never had any kind of commercial interests in Syria or Iran," he told Russia's Interfax news agency.

He told RIA he planned to visit the United States next week to sign a contract to hold the World Chess Championships next year in New York.

Reuters was unable to reach Khuri or Russian Financial Alliance Bank for comment. (Additional reporting by Susan Heavey in Washington and Jack Stubbs in Moscow; Editing by Alan Crosby)

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