Two European banks have signed up to help Iran tap the international capital markets.

The decision to help Iran flies in the face of the US view that the Middle Eastern state is the most active state sponsor of terrorism and a member of the "axis of evil".

Iran is set to announce on Monday that it is pressing ahead with its first eurobond issue since the 1979 Islamic revolution.

Germany's Commerzbank and France's BNP Paribas will handle the issue.

The appointment of the two high profile banks would mark the end of Iran's struggle to rejoin global capital markets.

A spokesman from Commerzbank confirmed the German bank's role, but did not have any other details about the size or timeframe of the issue.

Interest payment concerns

Mohammed-Jafar Mojarrad, vice-governor of the central bank told the Financial Times newspaper that he was confident the bond issue would be well received.

An official at the bank has suggested that Iran could raise up to 500m euros ($460m; �316m) from the offer.

The eurobond issue has been subject to fierce internal debate, with critics arguing that payment of interest on the loan conflicts with Islamic principles.

The issue is expected to go ahead in the next few months, and could be followed by others by state-owned industries such as oil and petrochemicals.

It is not known whether the European banks will try and sell the bonds to US investors.

Commerzbank had no comment on the political implications of its involvement with Iran.