Widespread banking and economic sanctions against Iran are drying up investments and fomenting internal discord, two top government officials testified before a congressional committee Wednesday. But they acknowledge that, so far, the restrictions have not had the desired effect of persuading the Islamic Republic to back off its ambitions for a nuclear weapon.

A new round of talks between Iran and ambassadors from the U.S. and other nations is scheduled for next week in Geneva. "The international community is unified in its belief that a nuclear-armed Iran would have grave implications for the stability of the Gulf region, the broader Middle East, and the global economy," said State Department Under Secretary for Political Affairs William F. Burns."

Burns was joined before the House Foreign Affairs Committee by Stuart Levey, Treasury's Under Secretary for Terrorism and Financial Intelligence, who detailed the various sanctions imposed by the U.S. and the United Nations, and his office's efforts to enforce them. Treasury officials have visited 24 countries in recent months to persuade governments and businesses to watch out for possible violations.

As a result, "Iran has dramatically reduced access to financial services from reputable banks, and is finding it increasingly difficult to conduct major transactions in dollars or euros," Levey said. "With great regularity, major companies are announcing that they have curtailed or completely pulled out of business dealings with Iran."

Iran has taken to trying to hide its role "in transactions by removing or stripping their names from transaction documents," Levey said. Oil companies are not investing in new projects in Iran and other contracts have been canceled.

That's contributing to an escalating unemployment rate, especially among people younger than 30 years old. That is helping fuel internal political dissatisfaction and the Iranian Revolutionary Guard – a key target of the sanctions plan – "is taking increasing control over significant portions of the Iranian economy," Levey said.