BRUSSELS?Greece brushed off pressure from Washington and leading European capitals last month and vetoed a European Union decision to renew the bloc's nuclear-related sanctions on Iran's largest bank, U.S., Greek and European officials say.

The decision on Bank Saderat, a partly state-owned company that runs Iran's largest banking network and is accused by the U.S. of financing terrorism, came from senior officials in Prime Minister Alexis Tsipras's government, Greek and European officials said, as Athens seeks to rebuild close economic ties with Iran following Tehran's agreement in July 2015 to limit its nuclearprogram.

It is the first time the EU's remaining sanctions on Iran have been undercut by a government since the deal was reached.

The move is potentially risky for Greece, which will host U.S. President Barack Obama later this month. U.S. Treasury Secretary Jack Lew warned last year that any firm that deals with Saderat could be cut off from the U.S. financial system.

In 2007, the U.S. Treasury sanctioned Saderat as a terrorist financier for allegedly channeling money to Iran's regional proxies Hezbollah, Hamas and other Palestinian groups Washington considers terrorist. The Iranian government has previously denied any involvement by Bank Saderat and other institutions in terrorist financing. Bank Saderat didn't respond to a request for comment.

The United Nations sanctioned the bank for being involved in Iran's nuclear and ballistic missiles program, a move matched by the EU in 2010.

Under the July 2015 multinational nuclear dealwith Iran, which lifted most financial sanctions on Tehran, Saderat was one of just three banks kept on the EU's sanctions list for as long as eight years. Washington has the bank under sanctions indefinitely for terror financing.

In April, however, the EU's top court upheld the bank's challenge to the EU sanctions, arguing the 28-nation bloc had provided insufficient evidence to back up its claim that Saderat was carrying out illicit activities. The court allowed the EU to maintain the asset freeze for six months under an amended charge, a period that ended on Oct. 22.

Throughout that period, France and the U.K. worked to ensure the sanctions would be extended beyond October, seeking new evidence that Saderat was involved in illicit activities.

While there were doubts about the EU's chance of winning a fresh legal challenge, 27 of the EU's 28 governments were prepared to extend the sanctions, according to senior European and Greek officials. Greece alone opposed the action.

"There is an EU court decision and it should be respected," a senior Greek foreign ministry official said.

"There were very firm instructions from Athens to block it," said a second Greek official.

Greece's decision came despite entreaties from the U.S. to allow the sanctions to stand. While the Obama administration has been working with EU counterparts to encourage European banks to start working again with Iranian firms that are no longer under sanctions, the opposite was true for Saderat.

Congressmen with close ties to the Greek government also weighed in as Greece was warned it could pay a price if it allowed Saderat, whose office in Athens was effectively shut down after EU sanctions were imposed on Iran, to get back into business.

U.S. Treasury officials "raised concerns about the potential removal of sanctions on Bank Saderat with Greek officials and urged them not to impede effortsto reapply sanctions," a Treasury representative said.

However, there were countervailing pressures as well, European and Greek officials say.

One of Iran's biggest energy customers before the nuclear sanctions, Greece was eager to build political and economic ties with Tehran in the aftermath of the nuclear deal under the left-wing Tsipras government, which was seeking to shore up a shattered Greek economy.

Mr. Tsipras was among the first Western leaders to lead a big delegation of businesses to Tehran soon after the economic sanctions were lifted in mid-January 2016. Even before that, Greece and Iran launched discussions to resume Iranian oil deliveries and started negotiating a settlement giving Hellenic Petroleum, Greece's largest refinery, more time to repay at least half a billion euros ($548 million) worth of debt it owed Iranian firms before the imposition of EU sanctions.

A month ago, Iran's central bank chief held meetings in Athens with senior bankers and the country's Vice President Yannis Dragasakis, who is overseeing the reconstruction of Greece's fragile banking system. Officials say the Saderat case was discussed.

(END) Dow Jones Newswires

November 01, 2016 15:55 ET (19:55 GMT)

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