Iran Continues to Benefit from Mideast War

Latest Developments

Global oil prices spiked on December 18 after BP announced that it is pausing traffic in the Red Sea due to “the deteriorating security situation for shipping.” This announcement came as Yemen’s Iran-backed Houthis attacked two commercial vessels in the Red Sea — the latest in a string of Houthi missile and drone attacks against ships in the area. The rise in oil prices will benefit Tehran, which is also raking in cash from U.S. sanctions waivers, including access to $10 billion previously held in escrow in Iraq.

Expert Analysis

“Tehran hasn’t paid any price for October 7. To the contrary, Tehran likely assesses it greatly benefited from October 7 by receiving expanded U.S. and international sanctions relief after the massacre. Combined with its construction of a potentially impenetrable underground nuclear site and the ability to attack U.S. forces and maritime shipping with impunity, the ayatollah is likely more emboldened than ever.” — Richard Goldberg, FDD Senior Advisor

“Allowing the regime more access to resources like frozen funds empowers the arsonist behind the Middle East’s myriad fires. Tehran is likely to see the constant pulled punches and entreaties to use sanctions relief as Washington’s desperation for an off-ramp at any price, be it in the regional, nuclear, missile, or other domains. Tehran’s response has been and will continue to be escalation.” — Behnam Ben Taleblu, FDD Senior Fellow

“Right when it assumed office, the Biden administration started dismantling the sanctions regime against Iran step by step by refusing to enforce, maintain, or improve the sanctions. As a result, the United States lost its financial leverage over the regime and enabled Khamenei to expand his oppression at home and terrorism abroad. The solution is straightforward: restore the military deterrence and rebuild the sanctions wall.” — Saeed Ghasseminejad, FDD Senior Iran and Financial Economics Advisor

Expanded Sanctions Relief

While the Biden administration has acknowledged that Iran is ultimately responsible for the Hamas massacre on October 7, the administration has continued to expand sanctions relief for Tehran over the past two months. On December 13, Assistant Secretary for Terrorist Financing and Financial Crimes Liz Rosenberg told a House committee that Iran had tapped previously frozen funds for two transactions, but she declined to provide unclassified information regarding the amounts and purposes of those transactions.

The United States also allowed the United Nations (UN) missile embargo on Iran to expire on October 18 and has yet to enforce oil sanctions on Iran since the Hamas massacre. Despite reports that Iran had expanded its stockpile of highly-enriched uranium and downgraded its cooperation with UN inspectors, Washington did not push for any censure resolution at the International Atomic Energy Agency’s November board meeting.

Economic Growth

Relaxed sanctions on the energy sector are now fueling Iran’s economic resurgence. On November 27, the Statistical Centre of Iran reported a 7.1 percent increase in Iran’s gross domestic product (GDP) between June and August, almost half of which was due to energy sector growth. This followed a 7.9 percent GDP increase in the previous quarter, also disproportionately driven by the energy sector.

“Congress Should Take Away Iran’s $10 Billion Sanctions Relief,” by Richard Goldberg

“Lax Sanctions Enforcement Has Yielded a Windfall for Iran,” by Saeed Ghasseminejad and Behnam Ben Taleblu

“Iran Says It Still Has Access to $6 Billion in Frozen Funds,” FDD Flash Brief

“Expiration of UN Ban on Iran’s Missile Development Will Strengthen U.S. Adversaries,” FDD Flash Brief