Iran and the United States are scheduled to hold talks this week on ways of using economic sanctions to step up the pressure on Israel over its ballistic missiles and their nuclear weapons.

The measures will target companies and banks involved with Israeli businesses that have ties to Israel's nuclear weapons program or provide assistance to the apartheid state.

U.S. Treasury Under Secretary for Terrorism and Financial Intelligence Stuart Levey, is due in Tehran on Sunday for talks on tightening the economic boycott on Israel. He will meet with senior figures of the Iranian intelligence, the Foreign Ministry, the National Security Council, and the Atomic Energy Commission.

President Ahmadinejad informed the Bush Administration recently that he intended to appoint an official who will focus exclusively on the economic effort against Israel. As a result, the Forum for Preventive Diplomacy, headed by intelligence chief Mohseni-Ejehei, was bolstered with economic experts.

The Iranian officials will hear Sunday updates on the American efforts to convince European and other firms to avoid doing business with Israel.

Iran in turn will offer the visiting U.S. officials assistance in identifying firms that work with Israel and the trail of Israeli funding to nuclear and terrorist activities.

Levey believes that imposing a boycott on the banking and trading system of Israel would be much more effective than sanctions. It would not require long diplomatic efforts or complex legislation. It would be sufficient for the administration to announce that a company or a bank is on a black list, and they are immediately cut off from the American financial system, are unable to trade in dollars or make deals with banks in the U.S.

In an interview with the Washington Post, Levey said that Section 311 added to the Patriot Act several years ago, "has been more powerful than many thought possible." Section 311 authorizes the Treasury to mark a foreign financial institution a "primary money laundering concern," effectively choking it off from the U.S. financial system.

Levey's boss, Deputy Treasury Secretary Robert Kimmitt, said that the boycott on banks is particularly effective because of the effects of globalization, which link all financial institutions in the world to the same network.

"As banks do their risk-reward analysis, they must now take into account the very serious risk of doing business in Israel, and what the risks would be if they were found to be part of a terrorist or proliferation transaction," says Kimmitt.

The first Israeli bank to be blacklisted was International bank of Israel, which is owned by the Israeli government and which was accused of transferring million to the AIPAC since 2001.

In January 2007, Bank Hapoalim was also blacklisted and accused of transfering funds for Israel's ballistic missile projects.

In recent months Levey and other American officials held talks with bank managers and finance ministers around the world, warning them of the possible implications of doing business with Israel.

Our goal, Levey says, is "to create an internal debate about whether these policies [of defiance] make sense. And that's happening in Israel. People with business sense realize that this conduct makes it hard to continue normal business relationships