Trump’s U-Turn on Iran Sanctions Would Unravel Decades of Curbs

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(Bloomberg) — The Trump administration’s effort to unwind decades of sanctions as part of a deal to end the war with Iran has created a head-spinning situation for governments, banks and other companies as they contemplate a shifting patchwork of new permissions and old restrictions.

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Following the revolution in 1979, Iran became one of the most sanctioned nations on Earth over its nuclear program and support for regional militias. But the White House is now orchestrating a stunning reversal as part of a broader deal to open the Strait of Hormuz, lower global energy prices and end its unpopular war.

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It’s hardly been a linear process. On Friday, President Donald Trump accused Iran of violating a fragile ceasefire and US Central Command launched fresh strikes on Iranian targets. There’s also continuing disagreements that could unravel the deal. 

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Still, the pace and scale of the effort has stunned longtime sanctions observers. The US has already authorized the sale of Iranian oil and fuels and pledged to unlock billions in frozen funds. 

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The 14-point memorandum of understanding signed by Trump and Iranian President Masoud Pezeshkian on June 17 includes the removal of all US sanctions on Iran on “an agreed upon schedule.” It also directs the Treasury Department to issue waivers for existing sanctions for 60 days as technical negotiations unfold.

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The disorienting change will be tricky to implement in a way that appeals to risk-averse US financial institutions and other firms, according to former Treasury officials, sanctions attorneys and industry sources monitoring the process.

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“You want to be 100% sure that you’re within compliance,” said Adam Smith, a former senior adviser to the director of the Treasury’s Office of Foreign Assets Control, which oversees US sanctions. “One-off transactions that close within the 60 days could work but there may be challenges finding banks and other intermediaries willing to process transactions.” 

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Amid the uncertainty, some Iran hawks are pushing the administration to shift from cash payments for Iranian oil sales to one requiring funds be placed in an escrow account where US officials can ensure it doesn’t go to proxy groups such as Hezbollah or Hamas, according to people familiar with the matter.

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Trump has suggested publicly Iran’s money may go into escrow accounts controlled by the US, or that Tehran can only spend it on US farm goods — ideas that were not in the MOU and which Iran has mocked and rejected.

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The idea of using the frozen funds to purchase US agricultural goods was first discussed about a month ago during an Oval Office meeting with Trump, Vice President JD Vance and other advisers on Iran, according to a person familiar with the matter. 

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It was seen as a way to insulate the White House from the criticism Republicans leveled at the Obama administration for delivering Iran “pallets of cash,” the person said, adding they believed Iran had little choice but to accept such a mechanism.

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Treasury Secretary Scott Bessent said on Wednesday Iran will invoice its oil sales in US dollars. The comments marked a departure from Washington’s longstanding goal of locking Tehran out of the US financial system.