What Iran Stands to Gain From a Truce Deal With the United States

U.S. concessions could include the unfreezing of assets and unsanctioning of oil.

The United States and Iran might be edging closer to an agreement for ending their ongoing war. Such a deal would be momentous for the global economy, which has suffered from the closing of the Strait of Hormuz. But the stakes may be highest for Iran, which has been under a severe U.S.-imposed blockade for months—and broader sanctions for years.

What sort of sanctions relief can Iran expect? How has Iran managed its wartime economy amid the U.S. blockade? And will the situation at the Strait of Hormuz ever revert to the prewar status quo?

The United States and Iran might be edging closer to an agreement for ending their ongoing war. Such a deal would be momentous for the global economy, which has suffered from the closing of the Strait of Hormuz. But the stakes may be highest for Iran, which has been under a severe U.S.-imposed blockade for months—and broader sanctions for years.

What sort of sanctions relief can Iran expect? How has Iran managed its wartime economy amid the U.S. blockade? And will the situation at the Strait of Hormuz ever revert to the prewar status quo?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: What exactly are the potential economic concessions that could be made toward Iran [regarding its frozen assets around the world]? And how could that work in practice?

Adam Tooze: If you dig into this a little bit, what’s really at stake here is a pool of [frozen Iranian] assets—essentially claims that Iranians have, or the Iranian government, or Iranian suppliers, or Iranian banks have on the rest of the world that could run to as much as $120, $130 billion, which would be as much as one third of Iran’s desperately diminished GDP. And the crucial thing to understand is that most of these are not in the United States. They are sanctioned and frozen in place as a result of the threat of secondary sanctions by the United States against anyone that does any business with Iran.

So, we think large amounts of money that are notionally in Iranian name are located in places as far away as, say, South Korea, but also in the rest of the Gulf, perhaps $7 billion in India, $12 billion in Qatar. And these are all the result, essentially, of uncompleted transactions that have then subsequently been frozen and have accumulated in various frozen pots. Therefore, oil and gas sales that were never fully completed. Or one particularly obscure set goes back to military orders, which the Shah’s regime had placed with the United States, and, as it were, made advanced payment for and of which the Americans, of course, never delivered on. And so, there really is a huge amount of money apparently out there to the good of Iran that, were the Americans to lift this network of threats—both direct on its own part and then indirectly—would release a very considerable flow of resources to Iran.

The more immediate thing, and this is truly paradoxical, is that the Americans appear to be offering to unsanction Iran’s oil, the sales of Iranian oil—which, after all, was the principal weapon of the maximum pressure strategy adopted since the 2010s, which was to deprive Iran of its major source of foreign exchange. This would not be a matter of piled-up resources, it would be a matter of selling oil, which Iran has in abundance for hard cash immediately. And apparently the Americans, of course, are interested in this, in part because they just want to get the global oil market unstuck, and the Trump administration is worried about going into midterm elections with the price of petrol in the United States over $5 a gallon.

There is resistance inside Iran to any deal, which may account for the fact that a whole bunch of drones were launched in America’s direction. There is confusion on the American side, and there is also resistance on the side of the Israelis that just want to go hard and have a bunch of destructive work they want to finish, notably in Lebanon, which would be part of any kind of package deal, apparently—at least, Trump on some days seems to suggest it is. So, it’s very confused, but we are really exploring the boundary and the envelope of what might be possible here in a way that would have been unthinkable only a few years ago.

CA: Iran has been operating under severe sanctions from the Trump administration, including an actual blockade on Iran’s ports. How has Iran held up under the resulting economic distress?

AT: I think one of the things that’s important to squarely focus on in discussing this war is just the degree of mayhem, disruption, chaos, fear, damage, loss that all of this brought to Iran. This is a war of choice on the part of Israel and the United States. Despite all the huffing and puffing from the Israeli side, it, broadly speaking, is hugely asymmetric. The damage is massively on the Iranian side, not the other way around. Quite apart from the fact that Israel and the United States decided to pick this fight at this particular moment.

And it just gets lost in the wash. The Iranian labor ministry says that as many as 2 million people may have been thrown out of work as a result of the shock of the war. That’s out of a labor force of about 30 million. Iran has very low labor force participation, at least in the formal sector, in part because of the exclusion of women. Labor unionists in Iran put the figure closer to 3 or 4 million, which would be about 10 percent of the workforce. So, this is a huge recessionary shock.

The damage being done to Iran is huge. This is not sufficiently reported, but Israel is systematically targeting the industrial infrastructure of Iran. And they make no bones about it, and when pushed, they will simply explain that this is about attritting Iran’s military-industrial complex. So, they have targeted Iranian steel plants. They have targeted the petrochemical sector. They are trying to demolish the fabric and the infrastructure of the Iranian economy as we know it, in pursuit of weakening this existential foe.

The Iranians themselves currently put the figure of damage at about $270 billion, and that’s gigantic. That’s about half of Iranian GDP, if not more. And concretely, day by day, if you follow the right media, you can actually track the Israeli destruction. This is a war more like the one that Russia has been waging on Ukraine, on eastern Ukraine, than we genuinely credit from the Western side. So, it’s a very, very unequal fight.

From Diet Coke to condoms, the world’s supply chains have faced surprising downstream disruptions.

Washington should no longer be liable for Israeli misdeeds.

CA: The Iranian government has shut down the internet across Iran during the war. What is the effect of that for a modern economy? What costs would Iran suffer though if it remained cutoff from the internet?

AT: So, apparently, this is the longest internet blackout in history, so 88 days straight. That’s very dramatic, because Iran is a substantially online society. It’s estimated that about 10-plus million Iranians depend on various types of digitally enabled transactions, supply chain, business operation. So, that’s about a third of the workforce if we scale it in those terms. That’s spectacular to have that shut down.

There are, in fact, estimates by global consultancies that say that a society with a high level of interconnectivity, which I think is an appropriate description for Iran in the current moment, suffers a daily loss from a blackout of $23 million per 10 million inhabitants. So, if you scale that to 90 million inhabitants, you’re talking about a daily loss to the Iranian economy in the order of $180 million. So, you scale that over 88 days and you see the scale of the damage that’s being done here. It’s an absolutely spectacular interruption of basic services.

Apparently, there’s a SIM card you can acquire from the Iranian authorities, which exempts you from this ban. It is apparently true that you can buy a SIM that is, by Iranian standards, extremely expensive. And what this enables you to do is to access a sort of expanding array of different types of websites. But to get it, you have to register all of your personal details with the authorities. And from the point of view of many in fully online businesses—say, for instance, in the crypto space—registering your business with Iranian authorities in wartime is not exactly where they want to start. The internet previously had been a zone with a relative degree of freedom. And one of the things the authorities are doing is not just shutting this down—unsurprisingly, you might say, given the wave of protests that they encountered only shortly before the onset of this war—but they’ve then allowed this sort of limited access. So, right now, this interruption is just a huge drag on modern life in Iran.

CA: There’s a lot of diplomatic ambiguity about how the Strait of Hormuz could be reopened. There are already some suggestions that Iran, rather than imposing tolls in the ways that it has tried to do already for passing the Strait of Hormuz, could instead impose fees of various kinds. How can we tell whether Iran still has control over this body of water that’s so central to the global economy?

AT: I think this is a very nice technical illustration of the much bigger and broader point, which is that it’s very hard to imagine anything going back to normal any time soon in this region. Once the Iranians have sensed the power that control over Hormuz gives them, once the basic premise of American strategy in the region since the Carter Doctrine of the late ’70s—which is that this question of control should never arise and that Iran should never be put in a position where it could even dream of exercising effective control, or if it did dream it was a distant dream—now with the experience that we’ve actually had since the onset of this totally misguided war, how do we ever get back to the prior state? The answer is I don’t think we do in the foreseeable future.

And so, exactly as you say, I mean, what would you do if you were the Iranians? You will, of course, go to the cease-fire talks and say, “No, of course not. We’re not exacting a toll anymore, that would be highway robbery. It will be a fee, and it won’t be a toll.”

And the amounts of money involved, though significant from Iran’s point of view, are trivial from the point of view of the operators of the large tankers, because those are worth 100 times whatever it is that Iran might be tempted to levy. And so, there’ll be some modus vivendi that’s worked out. And it will be deeply embarrassing to the American side if this is ever easily represented as a toll.

This post is part of FP’s ongoing coverage. Read more here.

Cameron Abadi is a deputy editor at Foreign Policy. X: @CameronAbadi

Adam Tooze is a columnist at Foreign Policy and a history professor and the director of the European Institute at Columbia University. He is the author of Chartbook, a newsletter on economics, geopolitics, and history. X: @adam_tooze

Commenting is a benefit of a Foreign Policy subscription.

Already a subscriber? Log In.

Join the conversation on this and other recent Foreign Policy articles when you subscribe now.

Please follow our comment guidelines, stay on topic, and be civil, courteous, and respectful of others’ beliefs.

I agree to abide by FP’s comment guidelines. (Required)

The default username below has been generated using the first name and last initial on your FP subscriber account. Usernames may be updated at any time and must not contain inappropriate or offensive language.

I agree to abide by FP’s comment guidelines. (Required)

From Diet Coke to condoms, the world’s supply chains have faced surprising downstream disruptions.

Washington should no longer be liable for Israeli misdeeds.