The measures, approved on Monday during a meeting of EU agriculture and fisheries ministers in Luxembourg, will stop the operations of Bank Melli, Iran's largest, at its European offices in London, Hamburg and Paris.

Legal challenge

On Tuesday, Bank Melli said it would take action in British and EU courts to challenge the legality of the EU sanctions.

Melli Bank Plc, its subsidiary, said it would apply to the British courts for judicial review and an interim injunction to suspend the application of an EU asset freeze.

The EU had agreed the move because of the parent bank's alleged role in financing firms linked to Iranian nuclear and missile programmes.

"Melli Bank Plc will also be initiating proceedings before the European court of first instance to challenge the legality of the decision," the London-based bank said in a statement.

It said that the sanctions against it were disproportionate and discriminatory.

"Melli Bank Plc, as a UK bank, is legally and functionally distinct from its parent. It complies with all relevant sanctions [against Iran] and will continue to do so, and has an unblemished record of compliance with its regulators in the UK,"
the statement said.

Britain's treasury earlier issued a notice informing banks of the sanctions against Melli Bank Plc, instructing them to check whether they hold any accounts or funds for it and, if so, to freeze them.

The freeze also applies to the bank's Hong Kong branch.

Western fears

The EU move, running alongside a string of UN sanctions against Iran adopted since 2006, aims at persuading Tehran to suspend its uranium enrichment activities, which the west fears could be used to make a nuclear weapon.

But Hosseini warned that "this kind of behaviour will make the Iranian nation and government more determined in obtaining their rights".

Using a policy of "carrot and stick" against Iran would have no effect, he added.

Including Bank Melli, 20 Iranian companies and 15 individuals have been added to its existing sanctions list, according to information published in the European Union's official journal on Tuesday.

Among the individuals on the list are Reza Aghazadeh, head of Iran's Atomic energy organisation, and Mohammad Ali Jafari, the commander of the elite Revolutionary Guards.

They will be banned from entering the EU and have their funds in Europe frozen.

Tehran insists it wants nuclear energy only for a growing population whose fossil fuels will eventually run out and vehemently rejected calls to suspend enrichment for any length of time.