Updated

The Obama administration may soon tell foreign governments and banks they can start using the dollar in some instances to facilitate business with Iran, officials told The Associated Press, describing an arcane tweak to U.S. financial rules that could prove significant for Tehran's sanctions-battered economy.

While no decision is final, U.S. officials familiar with internal discussions said the Treasury Department is considering issuing a general license that would permit offshore financial institutions to access dollars for foreign currency trades in support of legitimate business with Iran, a practice that is currently illegal.

Several restrictions would apply, but such a license would reverse a ban that has been in place for several years and one the administration had vowed to maintain while defending last year's nuclear deal to skeptical U.S. lawmakers and the public.

The United States and other world powers reached agreement with Iran last summer to give the Islamic Republic billions of dollars in sanctions relief in exchange for its promise to curtail programs that would allow it to develop nuclear weapons

Because of its status as the world's dominant currency, the dollar often is used in money conversions. For example: If the Iranians want to sell oil to India and be paid in euros instead of rupees, so they could more easily purchase European goods, the process commonly starts with the rupees being converted into dollars.

American sanctions block Iran from exchanging the money on its own. And Asian and European banks have steered clear of such transactions, fearful of U.S. regulators who have levied billions of dollars in fines in recent years and threatened transgressors with a cutoff from the far more lucrative American market. Using dollars to make even a rupees-to-euros conversion, following that example, would still involve the money entering the U.S. financial system, if only momentarily.

Dropping the prohibition would go a long way to meet Iran's complaints that the West hasn't sufficiently rewarded it for taking thousands of uranium-spinning centrifuges offline, exporting its stockpile of the bomb-making material and disabling a facility that would have been able to produce weapons-grade plutonium. But it surely would prompt intense opposition from critics of last July's nuclear accord.

If approved, the new guidance would allow dollars to be used in currency exchanges as long as no Iranian banks are involved, according to the officials, who weren't authorized to speak publicly on the matter and demanded anonymity. No Iranian rials can enter into the transaction, and the payment wouldn't be able to start or end with American dollars. The ban would still apply if the final payment is intended for an Iranian individual or business on a U.S. sanctions blacklist.

The administration has hinted the U.S. could introduce new sanctions concessions, but has confirmed nothing.

In a speech Wednesday, Treasury Secretary Jack Lew lauded Iran for accepting the nuclear deal to achieve its goal of ending Western sanctions. "Since Iran has kept its end of the deal, it is our responsibility to uphold ours, in both letter and spirit," he told the Carnegie Endowment for International Peace.

Lew warned that "sanctions overreach" risked driving business away from the United States, hurting the U.S. and global economy and empowering economic rivals.

"Our central role must not be taken for granted," he said. "If foreign jurisdictions and companies feel that we will deploy sanctions without sufficient justification or for inappropriate reasons -- secondary sanctions, in particular -- we should not be surprised if they look for ways to avoid doing business in the United States or in U.S. dollars."

Members of Congress are crying foul. The 2012 National Defense Authorization Act instructs the president to "block and prohibit" all Iranian assets if they "come within the United States, or are or come within the possession or control of a United States person."

In a letter to Lew on Wednesday, Republican Sens. Marco Rubio and Mark Kirk said any Iranian access to dollars "would benefit Iran's financiers of international terrorism, human rights abuses and ballistic missile threats." They cited testimony last year by Treasury Department's sanctions chief, Adam Szubin, who told lawmakers Iran wouldn't be allowed "even to execute a dollarized transaction where a split second's worth of business is done in a New York clearing bank."

U.S. officials said the change wouldn't break that pledge because Iran still wouldn't have access to the American financial system. If an Indian bank exchanges the money with a Hong Kong clearinghouse and the money is eventually converted to non-U.S. currency, no Iranian institution ends up touching any dollars. And no Iranian rials would be entering the United States.

Both concerns are rooted in the Obama administration's designation of Iran in 2011 as a jurisdiction of "primary money laundering concern." Critics of Obama's outreach to Iran say softening the rules would provide Iran a toehold toward re-entering the global financial system, helping it raise more cash for U.N.-banned ballistic missile development or support of U.S.-designated terrorist groups.

Mark Dubowitz, an Iran sanctions expert at the Foundation for the Defense of Democracies and critic of the nuclear deal, said the administration's currency argument was "a bait and switch which ignores a long-standing administration commitment not to greenlight Iran's access to the greenback."

"This is above and beyond what is required by the nuclear deal," he argued.