* Sanctions target private and government-controlled banks
* Iranian central bank is main conduit for Tehran's oil
* Obama cites reservations about detainee provisions in bill
(Adds final 4 paragraphs on scope of bill, use of signing
By Laura MacInnis
HONOLULU, Dec 31 (Reuters) - U.S. President Barack
Obama signed into law on Saturday a defense funding bill that
imposes sanctions on financial institutions dealing with Iran's
central bank, while allowing for exemptions to avoid upsetting
The sanctions target both private and government-controlled
banks - including central banks - and would take hold after a
two- to six-month warning period, depending on the transactions,
a senior Obama administration official said.
Under the law, the president can move to exempt institutions
in a country that has significantly reduced its dealings with
Iran and in situations where a waiver is in the U.S. national
security interest or otherwise necessary for energy market
stability. He would need to notify Congress and waivers would be
temporary, but could be extended.
Sanctioned institutions would be frozen out of U.S.
"Our intent is to implement this law in a timed and phased
approach so that we avoid repercussions to the oil market and
ensure that this damages Iran and not the rest of the world,"
the senior U.S. official told Reuters.
Iran's central bank is the main conduit for
Tehran's oil revenues.
Obama signed the bill during his vacation in Hawaii, just
hours after Tehran said it had delayed planned long-range
missile tests in the Gulf and signaled it was ready for fresh
talks on its disputed nuclear program.
Senior U.S. officials said Washington was consulting with
its foreign partners to ensure the new sanctions can work
without harming global energy markets. They stressed the U.S.
strategy of both isolating and remaining open to engagement with
Iran was unchanged.
Obama did not single out Iran sanctions in his statement
released by the White House, but did express concern about a
number of provisions in the defense bill that relate to the
treatment and transfer of detainees.
"The fact that I support this bill as a whole does not mean
I agree with everything in it," Obama said, suggesting limits on
the ability to move terrorism suspects from the U.S. military
prison at Guantanamo Cuba to the United States for trial or to a
foreign country were ill-conceived.
"The executive branch must have the flexibility to act
swiftly in conducting negotiations with foreign countries
regarding the circumstances of detainee transfers," he said,
also calling federal courts "legitimate, effective and powerful"
means by which to prosecute some militants.
Reuters reported this week that the Obama administration is
considering transferring to Afghan custody a Taliban official
suspected of major human rights abuses as part of a long-shot
bid to improve the prospects for a peace deal in Afghanistan, a
move that has set off alarm bells on Capitol Hill.
Obama also raised concerns in the statement about a
requirement that he must notify Congress before sharing any
classified U.S. ballistic defense missile information with
In his statement, he said he intended to keep Congress
informed of U.S.-Russia cooperation on ballistic missile
defense, he would interpret the rule in a way that does not
limit his ability to conduct foreign affairs "and avoids the
undue disclosure of sensitive diplomatic communications."
The legislation authorized U.S. defense programs from war
fighting to weapons building. That included $662 billion for
defense in fiscal 2012, including the Pentagon's base budget and
the war in Afghanistan, although appropriators must still
approve the numbers before money is spent.
Obama said he signed the bill because he wanted to ensure
key services and defense programs get the financing they need.
But he followed in the footsteps of previous presidents in using
a "signing statement" to indicate he disagreed with or planned
to sidestep certain statues within a broad piece of legislation
he did not want to veto.
His predecessor, George W. Bush, was criticised for using
signing statements to expand executive power, including against
the ban on torture. Obama, who taught constitutional law at the
University of Chicago, has issued 20 signing statements since
his presidency began in 2009 compared with 36 in the final three
years of Bush's White House.
In a 2009 memo, Obama stipulated he would limit deployment
of the tool to circumstances where he had a "well-founded
constitutional objection" to a provision in a bill. But he also
defended signing statements as a legitimate way to ensure laws
are faithfully executed, while promoting "dialogue" between the
executive branch of government and Congress.
(Additional reporting by Alister Bull in Washington; Editing by