The U.S. Treasury Department warned that the European payments system created to trade with Iran without violating U.S. sanctions could face "severe consequences," Bloomberg News reported.

In January, France, Germany and the U.K. launched the Instrument for Supporting Trade Exchanges, or INSTEX SAS, a special vehicle aimed at facilitating Europe-Iran trade and circumventing U.S. sanctions that were restored after the Trump administration withdrew from the Iran nuclear deal in 2018.

In a May 7 letter, a U.S. Treasury official reportedly urged INSTEX President Per Fischer to "carefully consider" the vehicle's exposure to potential sanctions.

"Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system," Sigal Mandelker, the Treasury's undersecretary for terrorism and financial intelligence, wrote in the letter.

INSTEX's creators recently rejected Iran's demand for protection from reinstated U.S. sanctions. However, they reaffirmed their plan to pursue legitimate trade with the Middle Eastern nation.