The confrontation between Washington and Tehran since the 1979 Islamic Revolution has gone beyond politics, affecting the economy and culture. One of the key instruments of pressure has been the huge sums of Iranian assets frozen by the US under sanctions. With the start of the latest war, talks have resumed about the possible lifting of these restrictions as part of a deal. President Donald Trump promised to lift sanctions in exchange for signing an agreement, and according to Axios, a future pact could require Iran to stop enriching uranium, in return for access to billions of dollars of frozen funds.
The history of the asset freezes began in 1979 after the seizure of hostages at the US embassy and intensified amid the nuclear crisis. According to the US Institute of Peace, the volume of blocked funds reaches $100 billion. Washington deprived the Central Bank of Iran of access to foreign-exchange reserves, which severely complicated control of the rial exchange rate, financing of imports, and put pressure on the economy. In 2015, under Barack Obama, the nuclear deal allowed Tehran to recover part of its funds, but Donald Trump’s withdrawal from the agreement in 2018 and the reimposition of sanctions wiped out those gains.
Most of the frozen Iranian money is held in oil-importing countries, as well as in payments for weapons ordered during the Shah’s era that were never delivered. Key holders of the assets include China, Japan, India and South Korea. After 2018 Iran tried to conclude barter deals to buy goods not on sanction lists, but these countries feared US retaliation. An additional complication is Iraq’s dependence on Iranian electricity, which adds regional contradictions to the management of these funds.
Iran’s economy is experiencing a severe crisis, exacerbated by the war. The rial officially fell to 1.77 million to the dollar, inflation reached 73.5% annually (according to The Guardian), and food prices soared by 115%. Unemployment is especially acute among young people: according to Deputy Labor Minister Gholam Hossein Mohammadi, the conflict destroyed more than one million jobs, and another two million were lost indirectly. The minimum wage is about 170 million rials (~$96), and a further 4 million Iranians are expected to fall below the poverty line.
The release of frozen funds and lifting of sanctions could give Tehran a powerful resource for recovery. These funds exceed 20% of the country’s 2024 GDP (about $475 billion according to the World Bank). Oil expert Mamdouh Salama emphasizes that the weakness of Iran’s economy is a direct consequence of sanctions, and their removal would allow high growth rates through oil and gas exports. In addition, Iran could expand cooperation with China, where about $20 billion of its assets are frozen.
The possibility of unfreezing funds remains hostage to political and technical conditions. Tehran could direct them to finance imports, support foreign-exchange reserves, pay wages, rebuild infrastructure, and develop energy. However, strict Washington demands, the fear of US reprisals among asset-holding countries, and difficulties in banking oversight stand in the way. The proposed deal ties the lifting of sanctions to the freezing of the nuclear program. Thus, the economic benefits of the return of billions are large, but attainable only through a fragile political compromise and precise fulfillment of agreements.
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Why is Iraq dependent on Iranian electricity, and how does this complicate the management of frozen Iranian assets? - Iraq suffers from a chronic electricity shortage due to aging infrastructure and instability. Iran supplies Iraq with thousands of megawatts annually. To pay, Iraq transfers funds to accounts in banks in third countries (for example, in Oman or Iraq), but because of US sanctions these funds are “frozen” and cannot be transferred directly to Iran. This creates a vicious circle: Iran receives revenue but cannot use it, which preserves Iraq’s dependence while limiting Tehran’s freedom of action.
Which Shah-era weapons were never delivered to Iran, and how did this money become frozen as a result of sanctions? - In the 1970s Shah Mohammad Reza Pahlavi ordered large batches of arms from the US, including F-14 Tomcat fighters, Chinook helicopters, and tanks. After the 1979 Islamic Revolution, deliveries were halted. Iran paid advances that remained in American banks. With the imposition of sanctions these funds (estimated variously from $400 million to several billion dollars) were frozen. Disputes over returning the money continue to this day, as the US refuses to supply the weapons or return the funds because of the sanctions regime.
How is the Iranian government fighting the fall of the rial and hyperinflation with only limited access to foreign-exchange reserves? - The government uses several methods: introducing multiple exchange rates (a preferential rate for food and medicine imports and a market rate for other goods), printing money (which fuels inflation), tight control over banking transfers, and attempts to peg the rial to a basket of currencies. However, frozen assets abroad (estimated at $100–150 billion) are unavailable, so the government is forced to rely on oil revenues circumventing sanctions (for example, shadow sales to China) and import restrictions, which only temporarily stabilize the exchange rate but do not solve the problem of structural inflation.
Full version: مليارات مجمدة.. هل يغيّر رفع العقوبات الأمريكية المحتمل وجه الاقتصاد الإيراني؟