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The announcement is part of the bloc's high-profile efforts to support the nuclear accord that President Donald Trump abandoned in May. It is part of a wider package of 50 million euros earmarked for Iran in the EU budget. The EU is working to maintain trade with Iran, which has threatened to stop complying with the nuclear agreement if it fails to see the economic benefits of relief from sanctions. The bloc's foreign policy chief Federica Mogherini said in a statement the bloc was committed to cooperation with Iran.

She said: "This new package will widen economic and sectoral relations in areas that are of direct benefit to our citizens.” The bloc will spend 8 million euros on the Islamic Republic's private sector, including assistance for small and medium-sized enterprises and Iran's Trade Promotion Organisation. A further 8 million euros will go to environmental projects and 2 million euros to fighting harm caused by drugs. Mr Trump’s national security advisor had earlier issued a warning to Europe over backing Iran.

Iran latest: EU has defied Trump by giving Tehran aid

John Bolton said on a visit to Israel: ”We expect that Europeans will see, as businesses all over Europe are seeing, that the choice between doing business with Iran or doing business with the United States is very clear to them. "So we will see what plays out in November. But the president (Trump) has made it very clear - his words - he wants maximum pressure on Iran, maximum pressure, and that is what is going on." He added: "There should not be any doubt that the United States wants this resolved peacefully, but we are fully prepared for any contingency that Iran creates." European powers have been scrambling to ensure Iran secures enough economic benefits to persuade it to stay in the deal. This had proven difficult, with many European firms wary of far-reaching financial penalties by the Trump administration. French oil group Total pulled out a major gas project in Iran.

Iran news: Iran's President Hassan Rouhani has been angered by the sanctions

German Chancellor Angela Merkel said on Wednesday she agreed with her foreign minister that relations with the United States were changing but she stopped short of backing his call for a separate EU payments system to save a nuclear deal with Iran. In a long column on how Europe should respond to US policy under President Donald Trump, Heiko Maas, a member of Mrs Merkel's junior Social Democrat coalition partners, suggested that Europe needed its own system for cross-border payments to conduct trade with Iran in the face of US sanctions. European powers are scrambling to ensure Iran continues to get the economic benefits needed to convince it to stay in the deal agreed in 2015 with six world powers but which the US president abandoned in May. Mr Trump has since imposed new sanctions on Iran which could trigger penalties on EU firms doing business with Tehran.

Trump and Juncker met last month for trade talks