The Dutch government has frozen official contacts with Iran to protest the hanging of a Dutch-Iranian woman, the foreign ministry said.
Gharib Abadi, the Iranian ambassador was informed of the sanctions after he confirmed reports that Zahra Bahrami, 45, was executed in
Tehran on Saturday.
His embassy later said the hanging was 'an internal issue' that should have no impact on diplomatic relations.
Iranian state television reported Bahrami was hanged for possessing and selling drugs. The report said that initially Bahrami was arrested for committing 'security crimes,' but it did not say what became of that case.
Bahrami had been jailed in Iran since December 2009 after protests against Iranian President Mahmoud Ahmadinejad's re-election. Protesters took to the streets, saying the vote was marred by fraud and that opposition leader Mir Hossein Mousavi was the rightful winner.
The Iranian embassy in a statement on Saturday described Bahrami as a member of an international drug trafficking ring, who traveled on Dutch, Iranian and Spanish passports with different personal information.
The embassy said that Bahrami - who was born in Iran, but gained Dutch citizenship after moving to the Netherlands - was accorded the legal rights of an Iranian citizen, but that Tehran does not recognise dual nationality.
Bengt van Loosdrecht, the Dutch foreign ministry spokesman, said Uri Rosenthal, the foreign minister, was "shocked, shattered by this act by a barbaric regime.''
He added the hanging was especially shocking as Abadi had assured the Dutch minister on Friday that Bahrami's legal avenues had not yet been exhausted.
Dutch diplomats had been denied access to Bahrami while she was in prison because Iran refused to recognise her Dutch nationality. The Dutch government reportedly hired lawyers to defend her.
The diplomatic freeze means Iranian embassy staff are forbidden from meeting or having contact with Dutch officials without prior written approval, Van Loosdrecht said.
The foreign ministry also advised other dual citizens against traveling to Iran, as Dutch consular officials would now have no access to them if they are arrested.
Van Loosdrecht said Rosenthal would raise the issue next week when European Union foreign ministers meet in Brussels.