France's environment minister signed Sunday a plan for French firms to help tackle Iran's environmental problems, but criticised the refusal of her country's banks to work with the Islamic republic.

Segolene Royal met in Tehran with the head of Iran's Environmental Protection Organisation, Massoumeh Ebtekar, and a group of ministers, agreeing to work together on the water shortage, energy efficiency and pollution problems facing Iran.

She was travelling for three days with senior business figures from French environmental and renewable energy firms, including the boss of multinational Engie.

But both sides are aware that the refusal of major French banks to work in Iran is a huge obstacle to working together.

"It's a real problem. It's been raised by the Iranian ministers but also by French businesses," she told reporters in Tehran.

"It's completely unacceptable. We can't ask Iran to make efforts on energy transition... while the financial system doesn't respond, including on industrial cooperation that could help deal with energy, climate and pollution issues," she said.

Despite international sanctions being lifted under a nuclear deal with world powers in July 2015, major banks remain fearful of working in Iran in case they fall foul of remaining US sanctions related to its human rights record and ballistic missile programme.

The US government has tried to reassure European banks they will not face prosecution for working with Iran, but the rules are complex and financial institutions fear the eye-watering fines imposed in the past by the US Treasury including an $8.9 billion fine on France's BNP Paribas in 2014.

Royal said she would urgently look for a work-around, even if it meant looking outside France, for instance to smaller Italian banks that are less exposed to the US system.

"We will find a solution. Either we will work with non-French banks... or we will mobilise the public investment bank, or why not the European Investment Bank?" she said.

Royal added that the current obstacles were "completely contradictory" given the Paris climate agreement signed last year that called for major investments in the green economy.

She said she would return to Iran in February when the country is hosting a major environmental expo to discuss progress on the partnerships.

Ebtekar, who is also a vice-president of Iran, said earlier that the visit "shows the important international cooperation on the environment, and sends a strong message to the global community that countries can cooperate strongly on their shared interests and issues in the field of environment".

On Monday, Royal is due to visit Iran's largest saltwater lake, Orumiyeh in northwestern Iran, a UNESCO heritage site that has lost 90 percent of its surface water in the past two decades as a result of over-farming, dams and climate change.

an-er/ah

Engie