The White House is currently navigating a complex unwinding of sanctions against Iran, a move that signals a significant departure from decades of US foreign policy. This shift, driven by efforts to stabilize global energy markets, reopen the Strait of Hormuz, and conclude an ongoing conflict, presents a disorienting challenge for international governments, financial institutions, and corporations. Iran, following its 1979 revolution, became one of the most heavily sanctioned nations globally, primarily due to its nuclear program and support for various regional militias. Now, the Trump administration is orchestrating a stunning reversal, prompting a re-evaluation of established compliance protocols across the financial sector.
The process has been far from straightforward, marked by persistent disagreements and recent military actions. Just days ago, President Donald Trump accused Iran of breaching a fragile ceasefire, leading to fresh US Central Command strikes on Iranian targets. Despite these tensions, the pace and scope of the proposed changes have surprised even seasoned observers of sanctions policy. The United States has already greenlit the sale of Iranian oil and fuels, alongside commitments to release billions in frozen Iranian assets. A 14-point memorandum of understanding, signed by President Trump and Iranian President Masoud Pezeshkian on June 17, outlines the complete removal of all US sanctions on Iran according to an agreed-upon timeline. Furthermore, the Treasury Department has been directed to issue waivers for existing sanctions for a 60-day period as technical negotiations continue to unfold.
Implementing these changes effectively poses considerable hurdles, particularly for risk-averse US financial institutions and other businesses. Former Treasury officials, sanctions attorneys, and industry sources monitoring the situation emphasize the need for absolute certainty regarding compliance. Adam Smith, a former senior adviser to the director of the Treasury’s Office of Foreign Assets Control, highlighted that while one-off transactions completed within the 60-day window might be feasible, securing banks and other intermediaries willing to process such transactions could prove challenging. The specter of past penalties, such as the nearly $1 billion settlement paid by BNP Paribas in 2014 for alleged sanctions violations, looms large, making financial institutions exceptionally cautious.
Amidst this uncertainty, some voices within the Iran hawk community are advocating for a system where Iranian oil sales are not settled with direct cash payments but instead placed into an escrow account. This mechanism, they argue, would allow US officials to monitor and ensure that funds are not diverted to groups like Hezbollah or Hamas. President Trump has publicly entertained similar ideas, suggesting that Iranian funds might be managed through US-controlled escrow accounts or restricted to purchasing US agricultural goods—proposals not included in the original memorandum and openly rejected by Iran. The concept of using frozen funds for US agricultural purchases reportedly originated in an Oval Office meeting approximately a month ago, involving President Trump, Vice President JD Vance, and other advisors. This approach was seen as a way to shield the administration from criticism previously directed at the Obama administration regarding “pallets of cash” delivered to Iran.
Treasury Secretary Scott Bessent announced recently that Iran’s oil sales would be invoiced in US dollars, marking a significant departure from Washington’s long-standing policy of excluding Tehran from the US financial system. Achieving this would necessitate the involvement of major US or US-linked banks, entities traditionally hesitant to engage in transactions that carry potential sanctions risks. The initial step in this direction occurred with the issuance of General License X by the Treasury, authorizing oil sales in “US dollar-denominated funds.” Beyond this license, companies are widely expected to seek clearer guidance from the Treasury, including “comfort letters” or detailed fact sheets, to reassure their compliance departments about participating in such transactions. Michael Huneke, a trade and national security lawyer, noted that financial institutions typically exhibit greater risk aversion than their clients when sanctions programs are being dismantled, predicting similar caution in the current scenario.
The layers of sanctions imposed on Iran by successive US administrations and Congress were designed to be difficult to remove quickly. A 2015 law, the Iran Nuclear Agreement Review Act, mandates congressional review and approval for any nuclear agreement with Iran. Some hawkish US lawmakers are concerned that the current administration might attempt to bypass this law by claiming the new memorandum is not a nuclear agreement, despite its direct implications for the issue. Should this occur, these lawmakers are likely to exert pressure on banks and companies dealing with Iran, reminding them of their obligations under US law. They might point to legislation like the 2012 Iran Threat Reduction and Syria Human Rights Act, which requires US-listed companies to report Iran-related activities to the Securities and Exchange Commission, potentially exposing them to future congressional scrutiny if the deal falters. While General License X offers unprecedented relief, its reliance on waivers rather than new legislation suggests that the Trump administration may face an uphill battle in permanently lifting sanctions on Iran in the long term, according to Chris Kennedy of Bloomberg Economics.
