The Trump administration’s efforts to lift decades-long sanctions as part of a deal to end the war with Iran have created a confusing situation for governments, banks and other companies as they consider a shifting patchwork of new approvals and old restrictions.
After the revolution in 1979, Iran became one of the most heavily sanctioned countries in the world due to its nuclear program and support for regional militias. But the White House is now orchestrating a stunning about-face as part of a broader deal to open the Strait of Hormuz, lower global energy prices and end its unpopular war.
It was hardly a linear process. On Friday, President Donald Trump accused Iran violated a fragile ceasefire and US Central Command was launched fresh blows to Iranian targets. It also continues Disagreements That could scupper the deal.
Still, the pace and scope of the effort has stunned long-time sanctions watchers. The US has already approved the sale of Iranian oil and fuel and pledged to release billions of dollars in frozen funds.
The 14-point memorandum of understanding signed by Trump and Iranian President Masoud Pezeshkian on June 17 calls for the lifting of all U.S. sanctions against Iran according to “an agreed timeline.” In addition, the Treasury Department is instructed to issue waivers for existing sanctions for 60 days as part of the technical negotiations.
It will be difficult to implement the confusing change in a way that appeals to risk-averse U.S. financial institutions and other companies, say former Treasury Department officials, sanctions lawyers and industry sources monitoring the process.
“You want to be 100% sure that you are in compliance,” said Adam Smith, a former senior adviser to the director of the Treasury Department’s Office of Foreign Assets Control, which oversees U.S. sanctions. “One-off transactions completed within the 60 days might work, but it might be difficult to find banks and other intermediaries willing to process transactions.”
Amid the uncertainty are some Iran hawks They are pushing the government to move away from cash payments for Iranian oil sales to payments that require funds to be placed in an escrow account where U.S. officials can ensure they do not go to proxy groups such as Hezbollah or Hamas, people familiar with the matter say.
Read more: The US is waiving oil sanctions against Iran as the peace agreement brings major changes
Trump has publicly suggested that Iranian money might go into U.S.-controlled escrow accounts or that Tehran could only spend it on U.S. agricultural goods – ideas that were not included in the memorandum of understanding and that Iran has mocked and rejected.
The idea of using the frozen funds to buy U.S. agricultural goods was first discussed about a month ago during an Oval Office meeting with Trump, Vice President JD Vance and other Iran advisers, according to a person familiar with the matter.
This was seen as a way to shield the White House from criticism that Republicans had leveled at the Obama administration for providing Iran with “pallets of money,” the person said, adding that they believed Iran had no choice but to accept such a mechanism.
Treasury Secretary Scott Bessent said on Wednesday that Iran would settle its oil sales in US dollars. The comments marked a departure from Washington’s longstanding goal of excluding Tehran from the U.S. financial system.
For this to work, the U.S. would need to engage some of the largest U.S. or U.S.-affiliated banks, which have previously been reluctant to handle transactions that risk violating sanctions, according to a former Treasury Department official.
The first step came on Monday when the Treasury Department issued General License X, allowing oil sales in “US dollar-denominated funds.”
Read more: According to Bessent, the Iran talks are about a switch to dollar bills
In addition to the license, companies are likely to seek clear guidance from the Treasury Department – such as letters of comfort or fact sheets issued regularly for sensitive cases – to reassure compliance departments that it is OK to engage in transactions of this type, according to a person familiar with the assurances the oil industry is seeking.
The companies are seeking guidance that would apply to Venezuela after the U.S. captured then-President Nicolas Maduro in January, the person said.
“Financial institutions tend to be more risk averse than their customers when we see sanctions programs being lifted,” said Michael Huneke, a trade and national security attorney at Morgan, Lewis & Bockius LLP. “I would expect them to be very careful here too.”
Rushing and risking a possible violation is not an attractive gamble. BNP Paribas paid the United States nearly $1 billion in compensation in 2014 for allegedly violating sanctions against Iran and Sudan. Other banks also paid high fines.
Successive U.S. administrations, along with Congress, have imposed hundreds of sanctions against Iran over the years, creating a series of restrictions that are difficult to lift in one fell swoop.
A 2015 law called the Iran Nuclear Agreement Review Act requires Congress to review and approve any nuclear deal reached with Iran. It was passed after the signing of the 2015 Joint Comprehensive Plan of Action, implemented during then-President Barack Obama’s administration – an agreement that Trump repeatedly attacked before withdrawing from it in 2018.
Some hawkish U.S. lawmakers believe the administration could get around the law by saying the Iran MoU is not a nuclear deal, even as it addresses the issue directly, according to a person familiar with the matter.
If that happens, they would likely put additional pressure on banks and companies doing business with Iran and remind them of their obligations under U.S. law, the person said, requesting anonymity to discuss internal deliberations.
The person pointed to a 2012 law called the Iran Threat Reduction and Syria Human Rights Act, which requires companies listed on U.S. stock exchanges to report certain Iran-related activities to the Securities and Exchange Commission, potentially exposing them to future scrutiny from Congress if the deal fails.
“The General License However, relying on waivers rather than new laws means that “the Trump administration faces an uphill battle in the longer term in making good on its promise to permanently lift sanctions on Iran.”