U.S. President Barack Obama would have new authority to sanction foreign firms that sell gasoline and other oil products to Iran under legislation introduced Tuesday by a bipartisan group of 25 U.S. senators seeking to halt Iran's push to develop nuclear weaponry.

If the bill becomes law, the U.S. president would have clear authority to impose economic sanctions on foreign firms that sell, ship or insure gasoline or other refined oil products to Iran. Foreign subsidiaries of U.S. firms also would be covered by the proposed legislation.

Oil-rich Iran imports 40% of its gasoline so "this is the best leverage we have," Sen. Evan Bayh, D-Ind., said at a press conference to unveil the Iran Refined Petroleum Sanctions Act.

Iran is believed to be two to four years away from becoming a nuclear-armed power, and U.S. lawmakers hope the prospect of punishing sanctions on gasoline importers will convince Iran's government to abandon its nuclear ambitions.

The U.S. already has the ability to sanction firms doing business with Iran, but the president's authority would be stronger and more precise under the proposed bill, said Sen. Jon Kyl, R-Ariz.

Kyl said the bill gives firms that provide gasoline or other oil products to Iran a clear choice - do business with the $13 trillion U.S. economy, or with Iran's $250 billion economy, but not both.

Sen. Joseph Lieberman, I-Conn., said the bill would clarify "ambiguous" U.S. presidential authority to sanction firms that supply Iran with gasoline, giving the president "a powerful new tool to use" in negotiations with Iran.

The Senate bill is expected to be considered by the Senate Banking Committee before being brought to the full Senate. The committee's chairman, Sen. Christopher Dodd, D-Conn., is not a co-sponsor of the bill but Lieberman said Dodd is generally supportive of it.

Similar legislation was introduced in the U.S. House of Representatives last week. The bill, the Iran Diplomatic Enhancement Act, is co-sponsored by Reps. Mark Kirk, R-Ill., and Brad Sherman, D-Calif.

European firms would be hardest-hit by the proposed sanctions. U.S. lawmakers say a half-dozen firms - British Petroleum, France's Total (TOT), Swiss/Dutch-based Trafigura, and Swiss-based firms Glencore and Total, and India's Vitol - supply most of Iran's gasoline. Most of the tankers used to ship the gasoline are insured by Lloyd's of London.

In a telephone interview Tuesday, Rep. Kirk said he's been told to expect hearings on the House bill this summer, paving the way for a House vote this fall. He'd prefer swifter action, citing "credible reports" that Iran is already stockpiling gasoline in rented oil tankers.

Kirk expects sanctions would initially trigger anti-U.S. riots by Iranians, but longer-term, he thinks the measure would dry up Iran's gasoline supply, causing its economy to crater and unemployment to spike. Within a year, he predicts sanctions will prove to be "completely effective" in bringing Iran's government to the bargaining table, spurred by Iranians who say: "we can't eat nuclear weapons."

- By Judith Burns, Dow Jones Newswires, (202) 862-6692; Judith.burns@dowjones.com