Bread or Bombs? As Sanctions Lift, Doubts Fester Over How Iran Will Use Its Frozen Fortune

The map of Iran’s frozen fortune stretches from the banking towers of Beijing to the back offices of Baghdad, including the free zones of Qatar and even a handful of restricted accounts inside the United States.As President Trump moves toward releasing tens of billions of dollars in Iranian assets long locked away by sanctions, most Americans have little sense of where that money currently sits, who is holding it, or what Tehran intends to do with it once it is freed.China holds the largest share of Iran’s money parked abroad — as much as $50 billion, by some estimates — built up over years of discounted oil sales that Beijing’s banks booked as debt rather than cash. Iraq is on the hook for another $15 billion or so in unpaid gas and electricity bills, money Washington has kept Baghdad from sending to Tehran.Qatar’s share is smaller, around $12 billion, including $6 billion that landed there from South Korea in 2023 as part of a prisoner swap.Smaller sums sit in India, Japan, Luxembourg, Oman and the United States itself, frozen by overlapping waves of sanctions dating from November 1979 when Washington first blocked Iranian government deposits over the seizure of the American Embassy in Tehran. The United States expanded the freeze over the following four decades to target Iran’s nuclear and ballistic missile programs.Whether any of it will be used to rebuild Iran’s missile arsenal is the question dividing analysts and raising prominent calls for concern. Will Iran use the cash to rebuild a shattered economy, or to rearm a regime that was, just months ago, watching as its missile stockpiles were bombed into rubble?“It is a near certainty that released funds will indirectly and over time finance Iran’s missile and drones programs, given the fungible nature of money,” the research director of United Against Nuclear Iran, Daniel Roth, tells The New York Sun. “A dollar freed up here means a dollar freed up there, and the regime is explicit in asserting sovereign discretion over the use of its assets. As to what Tehran’s priorities are, it’s bombs and bullets, not roads and hospitals.”Doha Becomes the Test CaseThe mechanism for releasing the money is a 14-point memorandum of understanding reached between American and Iranian negotiators in mid-June, with portions reportedly signed electronically in Switzerland.Point 11 of that document commits Washington to make frozen Iranian funds “fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran,” language that does not specify what Tehran must do first to unlock the cash. Critically, it also does not name who counts as an acceptable “beneficiary,” leaving open the possibility that funds could reach entities tied to the Islamic Revolutionary Guard Corps rather than Iran’s civilian economy. Qatar’s $12 billion in Iranian holdings has become the earliest real-world test of that ambiguity. The money has sat in Doha since 2023, when $6 billion was transferred there from South Korea as part of a prisoner exchange, only to be frozen again after Iran’s October 7 backing of Hamas.Iran’s president, Masoud Pezeshkian, announced Monday that $6 billion of that total will now be released and returned to Iran, calling it a “great victory for the Iranian people.” It is, in effect, the first attempt by Tehran to cash in on the memorandum’s vague release language before any enforcement terms have been publicly settled.American officials say that, so far, no frozen Iranian assets have been released, and Qatar has not confirmed any transfer. This gap widened after Iran struck a Qatar-flagged tanker in the Persian Gulf over the weekend, complicating the very talks meant to formalize the deal. In other words: Tehran is publicly declaring victory on a fund release that neither of the other two parties to the transaction — Washington or Doha — has acknowledged actually happening. This is exactly the kind of gap that critics say the memorandum’s loose wording invites.Mr. Roth contends that Washington still has tools to limit the fallout if funds do move.“Escrow accounts, humanitarian designations, and Treasury licensing can restrict the direct use of funds, but they cannot eliminate the indirect effect of fiscal relief within a highly centralized state budget,” he explains.Washington, he continues, “can restrict vendor payments so that when Iran wants to purchase an approved product, the money is routed directly from the holding bank to the company.” He says America should also “retain the right to hit the kill switch on the whole enterprise,” though whether Tehran accepts those constraints “is another question.”A Divide Over PrioritiesNot every expert believes weapons spending tops Tehran’s priority list.A professor of practice in the economics of the Middle East at Brandeis University, Nader Habibi, tells the Sun that Iran’s battered economy will absorb most of the funds first.“To reduce public anger and assure the regime’s survival, Iran’s rulers are likely to allocate the larger share of any released funds to food, medicine and other basic necessities,” Mr. Habibi explains. “Military expenditures are important but, in my opinion, they have a second priority relative to addressing the immediate economic crises that Iran is dealing with.”He points out that Iran’s missile and drone programs already lean heavily on domestic production, with imported components arriving mainly through strategic cooperation with Russia and China, including a drone-for-weapons exchange with Moscow.That means frozen funds are less likely to determine whether Iran rebuilds its arsenal than how fast. The country can manufacture missiles and drones with cash it already has access to; a fresh injection from abroad would mainly accelerate the pace and scale of that rebuild rather than enable it from scratch.The executive director of The Soufan Center, a private security and intelligence consultancy founded by former Federal Bureau of Investigation agents that advises governments and businesses on terrorism and regional conflict, perceives the historical parallel differently.“It seems highly likely that the released funds end up funding Iran’s missile and drone programs and/or going toward rebuilding its proxy network,” Colin Clarke tells the Sun. “Just go back and revisit the GOP’s complaints about the JCPOA and ‘pallets of cash,’ and you have the same conclusion, though for political reasons, Republicans are now engaging in mental gymnastics to explain why this deal won’t result in that.”Mr. Clarke is pointing to a contradiction: Republicans spent years attacking the 2016 Obama-era cash shipment to Iran as a giveaway to a hostile regime, yet many of those same voices are now defending a similar release of funds under a Republican administration.Mr. Clarke keeps coming back to a second lever that has nothing to do with frozen bank accounts: the Strait of Hormuz. It’s the narrow stretch of water between Iran and Oman through which a fifth of the world’s oil passes, and which Iran shut down for months during the war before agreeing, under the June memorandum, to reopen it toll-free for a 60-day window while negotiations continue.Tehran and Muscat have since floated a joint arrangement to charge ships a “service fee” for transiting the strait, a proposal the Trump administration has rejected outright, with Treasury Secretary Scott Bessent warning Oman it would face sanctions if it helped Iran impose any toll.“If Iran maintains some form of control over the Strait, as its recent joint proposal with Oman suggests, it will not only have access to unfrozen funds, but will also have a steady stream of income that the IRGC will inevitably use to rearm and rebuild,” Mr. Clarke observes.Mr. Clarke’s concern is that frozen bank accounts are not the only source of leverage in play. If Iran secures even an informal toll or “service fee” on Hormuz shipping, it gains a second revenue stream that would not run through Washington’s escrow accounts or licensing rules at all — meaning it could not be monitored or restricted the way the frozen funds can.So far, the Trump administration’s response has been to sanction the Iranian agency created to manage the strait and to insist that no country will “control” it. Oman has told Washington that it has no plans actually to impose a toll.Tehran’s own commanders, however, leave little doubt about their intentions.Major General Ahmad Vahidi has said publicly that Iran’s frozen funds should not be barred from military spending, arguing that if the country hadn’t invested in its missile and drone arsenal, adversaries would have achieved their war aims during the recent conflict.The commander of the IRGC’s aerospace force, Brigadier General Majid Mousavi, has released footage from inside an underground missile facility, claiming Iran’s pace of restocking missile and drone launch platforms during the ceasefire has outpaced prewar production.Those claims sit awkwardly next to Washington’s own account of the war’s impact. The commander of United States Central Command, Admiral Brad Cooper, told the Senate Armed Services Committee on May 14 that strikes had destroyed more than 85 percent of Iran’s ballistic missile, drone and naval industrial base. Yet more recent intelligence reporting tells a murkier story: Drone manufacturing has already resumed since the ceasefire took hold, and roughly two-thirds of Iran’s missile launchers appear to have survived the bombing campaign altogether.France has already said it will not approve United Nations sanctions relief promised under the memorandum unless it is satisfied with the terms of a final accord, an early sign of friction among Washington’s allies over how the deal was structured. For now, Mr. Roth notes, Iran has yet to receive anything formally.“At this point, two weeks after the signing of the MOU, Iran is reportedly yet to receive any funds under the new arrangement,” he says. “The immediate test case appears to be the fate of the $6 billion held in Qatar, and the administration has so far provided scant public detail on how the release mechanism would work.”No firm date for any transfer has been made public. The June 17 memorandum sets a 60-day window for negotiators to work out the deal’s remaining terms, putting mid-August as the rough outer boundary for when a broader release, as opposed to Iran’s still-unconfirmed claim about Qatar, might actually happen.Critics contend that the deal lacks a real strategy.“It just seems as if, in addition to having no coherent military strategy, as it was divorced from tangible political objectives, the administration has also been engaging in ad hoc diplomacy,” Mr. Clarke says. “Resulting in what could be most charitably described as JCPOA-lite.”

Bread or Bombs? As Sanctions Lift, Doubts Fester Over How Iran Will Use Its Frozen Fortune

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