By Dan Williams
JERUSALEM (Reuters) - U.S. sanctions are having a strong effect on Iran's economy and popular opinion, though regime change there is not part of Washington's policy, President Donald Trump's national security adviser said on Wednesday.
The Trump administration re-imposed sanctions this month after withdrawing from the 2015 international nuclear deal with Iran, which Washington saw as inadequate for curbing Tehran's activities in neighboring Middle East countries and denying it the means to make an atomic bomb.
The U.S. turnaround outraged Iran, which has taken a defiant stance, and has rattled other world powers where some businesses have been debating whether to divest from the Islamic Republic.
"Let me be clear, the reimposition of the sanctions, we think, is already having a significant effect on Iran's economy and on, really, popular opinion inside Iran," National Security Adviser John Bolton told Reuters on a visit to Israel.
At a news conference in Jerusalem on Wednesday, Bolton was asked whether the United States had discussed any plans with Israel on how to capitalize on economic protests in Iran and if the demonstrations posed any tangible threat to the Tehran government.
"Just to be clear, regime change in Iran is not American policy. But what we want is massive change in the regime's behavior," Bolton said.
The Iranian economy has been beset by high unemployment and inflation and a rial currency that has lost half its value since April. The reimposition of sanctions could make matters worse.
Thousands of Iranians have protested against sharp price rises of some food items, a lack of jobs and state corruption. The protests over the cost of living have often turned into anti-government rallies.
"I think the effects, the economic effects certainly, are even stronger than we anticipated," Bolton said.
"But Iranian activity in the region has continued to be belligerent: what they are doing in Iraq, what they are doing in Syria, what they are doing with Hezbollah in Lebanon, what they are doing in Yemen, what they have threatened to do in the Strait of Hormuz."
The Strait is a strategic waterway for oil shipments which Iran's Revolutionary Guards have threatened to block in response to Trump administration calls to ban all Iranian oil exports.
U.S. LOWERS SANCTIONS BOOM
Washington imposed new sanctions on Iran in August, targeting its trade in gold and other precious metals, purchases of U.S. dollars and its car industry. Trump has said the United States will issue another round of tougher sanctions in November that will target Iran's oil sales and banking sector.
At the news conference, Bolton said: "We are going to do other things to put pressure on Iran as well, beyond economic sanctions." He did not elaborate.
Germany called on Tuesday for Europe to set up payment systems independent of the United States if it wants to save the Iran nuclear agreement.
European powers have been scrambling to ensure Iran secures enough economic benefits to persuade it to stay in the deal. This had proven difficult, with many European firms wary of far-reaching financial penalties by the Trump administration. French oil group Total pulled out a major gas project in Iran.
"We expect that Europeans will see, as businesses all over Europe are seeing, that the choice between doing business with Iran or doing business with the United States is very clear to them," Bolton said.
"So we will see what plays out in November. But the president (Trump) has made it very clear - his words - he wants maximum pressure on Iran, maximum pressure, and that is what is going on."
He added: "There should not be any doubt that the United States wants this resolved peacefully, but we are fully prepared for any contingency that Iran creates."
The pact between Iran and world powers lifted international sanctions that had been throttling the Iranian economy. In return, Iran accepted restrictions on its nuclear activities, increasing the time it would need to produce an atomic bomb if it chose to do so. It has long denied having any such intent.