WASHINGTON – The Bush administration has persuaded four of Europe’s largest banks, including London-based HSBC, to start breaking off contacts with Iran as Washington pushes for anti-Iranian sanctions by “the back door,” it was reported yesterday.

Citing anti-terrorist laws, the American Treasury and the State Department are strengthening their efforts for banks in the Middle East, America, and Europe to cut their links with Iran. Banks with branches and headquarters on American soil have in the past faced huge fines for dealing with countries that Washington has sought to isolate.

The drive to punish Iran for its refusal to cooperate over its nuclear program has intensified as administration officials are reluctantly accepting that the prospects for U.N. sanctions are bleak.

Four European banks, UBS and Credit Suisse of Switzerland, ABN Amro of the Netherlands, and HSBC have all started to reduce their links to Teheran, the New York Times reported.

“We are seeing banks and other institutions reassessing their ties to Iran,” the treasury’s undersecretary for terrorism and financial intelligence, Stuart Levey, told the newspaper.

“They are asking themselves if they really want to be handling business for entities owned by a government engaged in the proliferation of weapons of mass destruction and support for terrorism.”

Washington had hoped the U.N. Security Council would impose sanctions on Iran for its failure to comply with demands for it to stop its nuclear enrichment program.

But Russia, with the tacit support of China, has been adamantly opposed to sanctions. Attempts two weeks ago to end the impasse and reach agreement on a U.N. resolution ended in failure.

The Bush administration now hopes it can exert pressure on Iran by imposing “smart sanctions” targeted at officials and particular branches of the government, via a “coalition of the willing.”

The EU 3, Germany, France, and Britain, which have been leading the negotiations with Iran, sent their latest “carrots and sticks” proposals for breaking the deadlock to Washington last week.

Bush administration officials are adamant that Iran cannot be promised a Middle Eastern security “framework” in return for giving up its nuclear activities.

Secretary of State Rice flatly rejected such a proposal and also denied that the EU 3 had suggested a security guarantee for Iran.

“Security assurances are not on the table,” she told a television news channel. “It’s obvious that in addition to the nuclear issue, we have other issues with Iran. We have a state in Iran that is devoted to the destruction of Israel. We have a state in Iran that meddles in the peace process in the Middle East.”

With the backing of senior Democrats, some European officials are adamant that ultimately America will have to abandon its long-standing opposition to bilateral talks with Iran.

The idea of talks has been revived following the unexpected letter earlier this month from President Ahmadinejad of Iran to President Bush.

The letter was more of a rambling diatribe than a negotiation, but it revived speculation among foreign policy doves in Washington that a “grand bargain” could be the best solution for the confrontation.