U.S. to Provide Iran Access to $16 Billion in Frozen Funds

Latest Developments

The United States moved toward giving Iran access to at least $16 billion in the last few weeks, including $6 billion held in South Korea as part of a prisoner exchange deal and $10 billion held in Iraq to pay off Baghdad’s debts for its purchases of Iranian natural gas. Moreover, the Biden administration has remained silent regarding reports that the administration’s understanding with Iran would include up to an additional $7 billion in special drawing rights (SDR) from the International Monetary Fund (IMF) and potentially other cash as well. Washington has also failed to comment on Iranian Foreign Minister Hossein Amir-Abdollahian’s visit last week to Japan, where he reportedly requested access to $3 billion in frozen funds.

Expert Analysis

“Congress should be worried about the money we don’t see as much as or more than the money we already see. The Treasury Department needs to come clean on the status of funds for Iran from the IMF, and the State Department needs to comment on whether it is negotiating the release of additional funds currently frozen in Japan.” — Richard Goldberg, FDD Senior Advisor

“Iran is making a play for its frozen funds to be released through an escalatory test of wills in the region and with hostage diplomacy against the country that created the lock-up provisions and sanctions architecture in the first place. Congress should see the moves to unlock these monies as an attempt to avoid oversight and deliver Tehran unearned sanctions relief.” — Behnam Ben Taleblu, FDD Senior Fellow

How Did the Funds End Up in Escrow?

The funds released from South Korean banks as part of the prisoner exchange agreement were payments owed by South Korea to Iran for purchases of oil. South Korea and a handful of other nations, including China, India, Italy, Greece, Japan, Taiwan, and Turkey, were granted waivers in 2018 to continue buying Iranian oil after the Trump administration left the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action. The Trump administration canceled these exemptions in 2019 and diverted payments for already delivered oil into escrow accounts.

Japan is the only country with a publicly reported amount — approximately $3 billion — of unreleased Iranian funds. Still, it is likely that other states that had been granted exemptions also hold undisclosed amounts.

What Are IMF SDRs?

Unlike Iran’s escrowed funds, which are debts owed to Iran, SDRs from the IMF are units of account that a holder can trade for an infusion of liquid cash into its economy equal to the value of the SDRs. Allowing Iran to trade in its SDRs at the IMF could mean an infusion of $7 billion into Iran’s economy. The United States blocked a $5 billion IMF emergency loan to Iran in 2020, and U.S. law mandates that the IMF’s American executive director oppose allocating any funds to a state sponsor of terror.

Related Analysis

“U.S. to Release $6 Billion to Iran in Exchange for Hostages,” FDD Flash Brief

“In Major Reversal, U.S. Lifts Restraints on Iranian Income From Electricity Sales,” FDD Flash Brief

“How Congress Should Respond to an Interim Iran Deal,” by Richard Goldberg and Behnam Ben Taleblu