Congress Should Take Away Iran’s $10 Billion Sanctions Relief 

Just five weeks after the Hamas October 7 massacre, the State Department re-issued a sanctions waiver on November 14 enabling Hamas’s terror sponsor, Iran, to use more than $10 billion in previously inaccessible funds held in Iraq. While the administration claims that funds are restricted to humanitarian purchases, the waiver provides massive sanctions relief for Iran tied to a secret nuclear understanding reached earlier this year. 

When the Trump administration ceased U.S. participation in the nuclear deal with Iran formally known as the Joint Comprehensive Plan of Action, several statutory sanctions came back into force, including the Iran Freedom and Counterproliferation Act of 2012, which threatens U.S. sanctions against entities that do business with Iran’s energy sector. Since Iraq remains dependent on imports of electricity from Iran, the Trump administration allowed Iraq to physically import the electricity on condition that Baghdad pay for it by depositing Iraqi dinars into an escrow account in the Trade Bank of Iraq to hinder Iran’s access to the funds. To avoid U.S. sanctions, Iraq respected the terms of this waiver despite political pressure from Tehran.  

This arrangement remained U.S. policy until July 2023, when the Biden administration issued a new waiver allowing Iraq to transfer its electricity payments outside its borders. Under questioning on July 24, 2023, the State Department’s spokesperson revealed that Iran’s funds previously held in Iraq would be transferred to a bank in Oman where Iran could draw down funds to subsidize its budget. According to the text of the new waiver, introduced into the congressional record by U.S. Rep. Bill Huizenga (R-MI) on October 25, the State Department authorized Iraq to move its previously escrowed funds through France, Germany, and Oman — likely to exchange dinars for euros. 

The revised waiver of July 2023 is a radical departure from its predecessors. It blows a wide hole in U.S. sanctions on Iran by removing any requirement to keep money in escrow in Iraq, prevent conversion to euros, and render the funds largely inaccessible. Additionally, since Iraq continues to make payments for electricity, the sum of funds available to Iran will continue to grow. 

The Biden administration argues that the $10 billion sanctions relief is not significant since Iran will be restricted to using the funds for “humanitarian” or “non-sanctioned” purposes only. The administration used this same argument to defend the transfer of $6 billion of Tehran’s assets in September from South Korea to Qatar. Republicans and Democrats on Capitol Hill both rejected the administration’s claim because money is fungible. If the regime receives billions to cover non-sanctioned expenditures, that frees up an equivalent amount for illicit programs. Iran also has a long track record of processing phony humanitarian transactions for illicit purposes. 

Congress should be under no illusion of what this waiver represents: massive sanctions relief for Iran tied to an unacknowledged nuclear understanding that evaded the Iran Nuclear Agreement Review Act’s requirement to allow Congress to review and potentially reject sanctions relief provided to Iran. In the wake of October 7 and non-stop Iran-directed attacks on U.S. forces in the Middle East, Congress should swiftly enact legislation that freezes all cash made available in Iraq, France, Germany, Oman, and Qatar and all other accounts where Iranian funds are held. 

Richard Goldberg is a senior advisor at FDD, directs FDD’s International Organizations program, and contributes to FDD’s Center on Economic and Financial Power. He previously served on the White House National Security Council as deputy chief of staff to former U.S. Senator Mark Kirk and as chief of staff to former Illinois Gov. Bruce Rauner. Follow him on X @rich_goldberg. Follow FDD on X @FDD. FDD is a nonpartisan research institute focusing on national security and foreign policy.