While the specific details of an Iran-US ceasefire agreement — or even a long-term deal — seem very much up in the air, a key demand from Tehran will likely be the return of Iranian assets frozen abroad.
Both current reporting on the ongoing negotiations as well as a history of conditioning their approval with the release of funds stashed overseas suggest this demand will come on top of a broader request for the US to lift all primary and secondary sanctions imposed on Iran.
The exact value of Iran’s frozen assets is unclear, but several estimates place the total over $100 billion (€86.5bn).
In the past, the Tehran regime set up foreign currency accounts with major global banks to maintain reserves to back the value of Iran’s official currency, the rial.
Successive sanctions packages blocked the regime’s access to these funds, often sending the rial into a tailspin and preventing Iranian companies, which purchase goods and services from foreign suppliers, from settling in euros, yen or other currencies.
So important is the access to foreign currencies that during a congressional hearing in February, Treasury Secretary Scott Bessent went as far as to admit that the US purposely caused a dollar shortage in Iran as a catalyst for protests.
“We created a dollar shortage in the country … with a grand culmination in December when one of the largest banks in Iran went under, there was a run on the bank, the central bank had to print money, the Iranian currency went into free fall, inflation exploded and hence we have seen the Iranian people out on the street,” Bessent said.
Before the war broke out, Iran was already in a full-blown economic emergency. The Statistical Centre of Iran put year-on-year inflation at 68.1% in February — the highest since World War II — while the Central Bank of Iran reported a slightly lower rate 62.2%.
This underscores why the frozen assets are a key demand in the ongoing negotiations.
The US has long used sanctions to impede Iran’s access to its foreign exchange reserves, but there have also been multiple instances when the country was given partial access to frozen assets.
For example, after reaching an interim nuclear deal in 2014 with the US, Britain, China, France, Germany and Russia, Iran was allowed to repatriate $4.2 billion (€3.6bn) in oil revenues held abroad.
In 2015, the same countries finalised the Joint Comprehensive Plan of Action (JCPOA) in which Iran agreed to significantly reduce its nuclear programme, allow foreign observers to inspect its nuclear sites and, in exchange, regained access to more than $100 billion (€86.5bn) in frozen assets.
However, during his first term in 2018, US President Donald Trump withdrew from the JCPOA and reimposed wide-ranging US sanctions, effectively re-freezing Iran’s assets abroad.
Trump will now have to consider changing his stance on the issue as US officials head into further negotiations with Iran in Islamabad on Friday.
Which countries hold Iran’s assets?
Reports over the years suggest that significant Iranian reserves are held in South Korea and Japan which historically are major customers of Iran’s oil exports.
According to the US Financial Crimes Enforcement Network, oil buyers in countries such as Singapore and the UAE have sent transfers “potentially linked to sanctioned Iranian oil to entities potentially controlled by Iran, specifically other oil companies based in the UAE and likely shell companies based in Hong Kong.”
The Central Bank of Iran also reportedly maintains accounts in several other countries, including China, Germany, India and Turkey.
In the ongoing war, following Iranian strikes on Gulf states, Trump remarked he was surprised Iran would hit the countries managing its wealth abroad, stating, “That’s strange, you know? The UAE is like the banker for Iran. They’re sort of the banker.”
Depending on each of the respective countries holding them, it remains unclear if the assets are partially, fully or even frozen at all, as they maintain varying levels of coordination with the US on the issue of Iranian sanctions.
Since the reimposition of US secondary sanctions in 2018, Iranian diplomacy has focused in large part on bilateral negotiations with these countries to seek the release of funds.
The most recent major transfer came in September 2023, when around $6 billion (€5.1bn) in Iranian oil revenues, frozen in South Korean banks since 2019, were moved to restricted accounts in Qatar under a US sanctions waiver tied to a prisoner exchange.
Iran could only conditionally access these funds for humanitarian purchases such as food and medicine, and with strict US oversight.
They were subsequently blocked again following the Hamas-led attacks of 7 October 2023 due to Iranian funding of the terrorist organisation.
A problem since the revolution
Following the overthrow of the Western-aligned government of Shah Mohammad Reza Pahlavi in 1979 and the capture of US citizens during the Iran Hostage Crisis, US President Jimmy Carter froze the formerly freely traded assets of Iran.
During the over 400-day crisis, 66 Americans including diplomats and civilian personnel were taken hostage in the US embassy — an incident widely thought to have ultimately derailed the slim possibility of a close relationship between the new regime in Tehran and Washington.
Under Executive Order 12170, signed in November 1979, Carter froze approximately $12 billion (€10.3bn) of Iranian government deposits, gold and other property held in US banks and their overseas branches, according to the US Treasury’s Office of Foreign Assets Control.
The assets were partially unfrozen in January 1981 under the Algiers Accords, which ended the hostage crisis.
Iran paid off around $3.7 billion (€3.1bn) in loans to US banks, with a further $1.4 billion (€1.19bn) placed in escrow at The Hague to settle outstanding commercial claims, and roughly $2.9 billion (€2.48bn) returned to Tehran outright.
An Iran-US Claims Tribunal established under the accords continues to operate at The Hague to this day.
Iranian assets continue to be far from reach
Decades of subsequent sanctions in response to Iran’s nuclear programme, ballistic missile development and its designation as a state sponsor of terrorism expanded the total pool of frozen assets far beyond the original freeze.
In the past, any discussion of releasing funds was usually followed by Western criticism about the funds being used for nuclear proliferation and weapons purchases.
As the negotiating teams head to Islamabad on Friday, Iran’s assets will be a key point of discussion.
Whether the US will be willing to unfreeze funds, exactly how much, from which countries and under which conditions, remains to be seen.