The Trump administration faces criticism for its temporary lifting of sanctions on Iranian oil. Opponents argue that this decision disproportionately benefits Iran economically. They suggest that Washington has effectively granted Tehran a financial advantage beyond its usual gains from oil sales, despite the sanctions. Some propose retroactively modifying the waiver by directing Iranian oil revenues into escrow accounts, a measure Iran would unlikely agree to.
Such a move may sound strong politically; however, it risks undermining the agreement that reopened the Strait of Hormuz. Diplomacy seeks achievable outcomes, not ideal ones. The memorandum between the U.S. and Iran isn’t perfect from an American standpoint. It includes concessions unappealing to many Americans, including the temporary sanction relief on Iranian oil.
The critical issue isn’t how Iran benefits from the deal. While Iran gains, the benefits aren’t substantial enough to justify jeopardizing the agreement that’s revitalizing partial Strait of Hormuz traffic. Contrary to public perception, Iran hasn’t recently gained access to significant new oil revenue. For years, it has sold large volumes of oil, notably to China, bypassing sanctions. Lifting sanctions primarily improves realized revenues from ongoing sales, allowing Iran to fetch better prices and facilitate repatriating proceeds.
The waiver provides Iran with around $1.5 billion in extra revenue during its initial 60-day authorization compared to if sanctions persisted. Even if extended, as some predict, the revenue boost remains below critics’ estimates. While any additional funds to Iran are unwelcome, policymakers must weigh foreign policy costs and benefits, not merely identify disapproved elements.
The suggested alternative involving escrow accounts remains impractical. Iran is unlikely to agree to terms where reopening the Strait of Hormuz leads to oil export proceeds under American control. Genuine negotiation must consider feasible agreements; assumptions about tougher alternatives fail in practice.
The real choice was between an acceptable agreement to Iran and no agreement, leading back to selling oil without the waiver. Such actions might result in shutting down the Strait of Hormuz again. The broader agreement’s primary accomplishment lies in reopening this vital global energy chokepoint. Ending associated disruptions necessitated concessions. Imagining Washington could achieve this while dictating terms was unrealistic.
This political reality poses challenges and maybe embarrassing for those seeking a better agreement. Successful diplomacy compares real options rather than unrealistic ones. Lifting Iranian oil sanctions might be imperfect, even undesirable, but risking the Strait’s closure over moderate Iranian revenue increases is a greater error. Reopening negotiations on agreed terms isn’t advisable. Sometimes choices involve imperfect deals versus none at all.
Brett Erickson serves as managing principal at Obsidian Risk Advisors and sits on advisory boards at Seton Hall School of Diplomacy and International Relations, and DePaul University Driehaus College of Business.