“Unprecedented benefits”: the economic significance of the agreement for Iran

The memorandum of understanding between the United States and Iran designed to end the war includes huge economic benefits for the Iranian regime. From the text of the memorandum published in Bloomberg, there are 5 different clauses concerning the economic sectors that Iran will receive – some immediately, some during the negotiations and some at the time of the final agreement.

“The Iranian regime is in a serious economic problem. It realizes that it has no way to provide electricity, water and food to the population,” says Avner Willen, a former senior official in the security establishment and an expert on Iran, describing the agreement as a “crazy game changer” for Tehran.

“The carrots that are offered here to Iran are unprecedented. This will allow the regime to survive indefinitely,” explains Willan.

• The US will lift the naval blockade and restore full maritime traffic within 30 days.
• The US will lift sanctions on the Iranian oil industry and related services.

According to the text of the agreement published in Bloomberg, Iran will receive two economic benefits immediately after the signing of the memorandum of understanding, which is expected to take place on Friday in Switzerland. These benefits are expected to provide Iran with a dramatic oxygen supply at a time when its economy is in complete collapse.

The first benefit is the lifting of the naval blockade that Trump announced on April 13, in which access to Iranian ports in the Persian Gulf was blocked. As part of the blockade, the US military announced that it had repelled dozens of ships trying to reach Iranian ports, thereby effectively blocking Iran’s ability to export oil – a key revenue channel for it. President Trump claimed that Iran loses approximately $500 million each day of the blockade, and various experts estimated that Tehran would suffer a severe blow to its ability to pump oil in the long term if the blockade continued.

At the same time, the United States pledged to temporarily lift sanctions on the Iranian oil industry and related services. Whelan explains that these are two “complementary steps” – the lifting of sanctions will allow Iran to sell oil on the commercial level, and the opening of the blockade will allow it to actually export it.

“Iran exports approximately 2 million barrels of oil per day – we are talking about billions that will start entering the country’s economy more or less immediately,” explains Willan. According to him, these are benefits that are “very important to the regime”, which are expected to return it to the economic situation it was in before the war.

“They were in dire straits even before the war, and then the war inflicted a lot of economic damage on them. These benefits will allow them to inject money into the economy, provide services to citizens, restore trade – this will bring them back to their pre-war situation and maybe even better,” says the expert.

• The thawing of the frozen Iranian assets.

After the two benefits that will be granted to Iran immediately upon signing the agreement, the memorandum of understanding includes a third benefit that will be given to Iran subject to progress and meeting the goals of the negotiations. According to the benefit, Iran will get access to its frozen assets around the world, and you can use them according to the decision of its central bank.

These assets have been frozen as part of the sanctions against Iran over the years, and are in a long list of countries – from the United States, through the United Arab Emirates to China. Their estimated value is about $100 billion, and according to various reports, Iran demanded access to about $24 billion of them as part of the negotiations. As of today, Iran cannot use these funds, which may be essential for its economic rehabilitation.

• Cancellation of all sanctions on Iran.
• Establishing a reconstruction fund for Iran in the amount of 300 billion dollars.

The most dramatic benefits specified in the memorandum of understanding will be granted to Iran only if a final agreement is signed between Tehran and Washington, according to the published text. These are benefits that are expected to boost the Iranian economy far beyond its pre-war situation, and to abolish decades of measures and economic restrictions on it.

According to Article 7 in the published version, the United States undertakes to cancel all sanctions imposed on Iran. The memorandum of understanding specifically refers to the secondary sanctions, i.e. sanctions that the United States announced it would impose on countries and entities that cooperate with Iran – which in fact greatly isolated the Iranian economy. The text of the memorandum indicates that all the sanctions imposed by the US on Iran will be lifted, which goes further than the text of the 2015 nuclear agreement, in which only some of the sanctions on Tehran were lifted.

“There is a collection of things that have been built up over the years to deal with Iran and all of this should be canceled. This will allow Iran to develop an economy like all economies,” says Willan, emphasizing that the removal of sanctions will improve Iran’s situation compared to its pre-war situation.

Another American commitment anchored in the memorandum of understanding is to establish a reconstruction fund for Iran in the amount of 300 billion dollars. In the United States it has already been made clear that the money for the fund will not come from the United States, and according to Willen, great difficulties are expected in raising money for this fund.

The funds of the fund are intended to rehabilitate Iran and balance the damage of the war. The expert explains that Iran will be able to use this money to restore its military infrastructure, even if the fund does not finance it directly. “It may not be direct funding for the military infrastructure, but then money will be freed up to finance the restoration of the infrastructure and the fund will be invested elsewhere,” says Willen.