China rejected President Barack Obama's decision to move forward with plans for sanctions on countries buying oil from Iran, saying Saturday that Washington had no right to unilaterally punish other nations.

South Korean officials said they will continue working with the US to reduce oil imports from Iran, as other US allies who depend on Iranian oil worked to find alternative energy supplies.

Obama announced Friday that he is plowing ahead with the potential sanctions, which could affect US allies in Asia and Europe, as part of a deepening campaign to starve Iran of money for its disputed nuclear program.

The US and allies believe that Iran is pursuing a nuclear bomb; Iran denies that.

China is one of the biggest importers of Iranian oil, and its Foreign Ministry reiterated its opposition to the US moves.

"The Chinese side always opposes one country unilaterally imposing sanctions against another according to domestic law.

Furthermore it does not accept the unilateral imposition of those sanctions on a third country," the ministry said in a brief statement Saturday.

Beyond the rhetoric, Beijing has taken a two-pronged approach to the US demands, insisting that China has the right to import oil from Iran or any other country while quietly reducing imports of Iranian oil.

Though the government has not explained the reductions, oil traders and industry executives have said it may stem more from a pricing dispute with Iran than as a response to US pressure.

Behind the scenes, Washington has repeatedly encouraged Beijing to seek supplies elsewhere, and Saudi Arabia offered to fill a shortfall when Chinese Premier Wen Jiabao visited Gulf countries early this year.

The looming US sanctions aim to further isolate Iran's central bank, which processes nearly all of the Iran's oil purchases, from the global economy.

Obama's move clears the way for the US to penalise foreign financial institutions that do oil business with Iran by barring them from having a US-based affiliate or doing business here.

Obama's goal is to tighten the pressure on Iran, not allies, and already the administration has exempted 10 European Union countries and Japan from the threat of sanctions because they cut their oil purchases from Iran.

Other nations have about three months to significantly reduce such imports before sanctions would kick in.

The main importers of Iranian oil that have not received exemptions from the US are China, India, Turkey, South Africa and South Korea.

The administration would be loath to hit a close friend like South Korea or India, or a Nato ally like Turkey, with sanctions, and is working with those countries to reduce their imports.

Foreign Ministry officials in South Korea said Saturday that they expect to reach an agreement with Washington by late June on reducing oil imports from Iran.

The officials declined to be named because discussions were still under way.

The US sanctions are set to take effect on June 28.

A European oil embargo, approved in January, starts in July.

Put together, Obama administration officials contend Iran is about to face its most severe economic pressure ever.

The United States imports no oil from Iran.

Energy-starved India, which relies on Iranian oil for 12 percent for its power needs, has said that it does not heed unilateral sanctions such as those imposed by the US and EU.

Nevertheless, New Delhi has not remained completely immune to sanction pressures and is slowly easing its dependence on Iranian oil, with a slow decline in Iranian oil imports.

The Western sanctions also have made it harder for Indian companies to pay for Iranian oil, with international banks unwilling to handle transactions from Tehran.

In February, India irked the West by arranging to make 45 percent of its yearly $11 billion oil payments to Iran in Indian rupees, with the rest paid in a barter system as Tehran seeks Indian-made machinery, iron and steel, minerals and automobiles.

Turkey announced Friday it was shrinking oil imports from Iran by 20 percent, apparently bowing to pressure from the United States and the sanctions threat.