US and Iran clash over conditions for $12bn in frozen assets
Washington insists funds be used exclusively for US exports, while Tehran asserts absolute liberty to spend on any goods, raising questions about the viability of renewed bilateral trade.
Negotiations to conclude a Middle East peace deal have encountered a significant impasse following a fundamental disagreement between the United States and Iran regarding the release of $12 billion in frozen Iranian assets. The Trump administration has mandated that any unfrozen funds be held in a US-controlled escrow account and utilised exclusively for the purchase of American agricultural products, including corn, soybeans, and wheat, alongside medical supplies. This condition aims to support US farmers and mitigate domestic political criticism, with President Trump stating on Truth Social that the money would be used to feed the Iranian people while enriching American producers.
Iranian officials have firmly rejected these stipulations, asserting that Tehran retains the absolute liberty to allocate the funds based on market principles of price and quality rather than political dictates. Foreign Ministry spokesman Esmaeil Baghaei stated that any agricultural purchases would be determined by Iranian needs, not terms imposed by Washington. Iran’s ambassador in Geneva, Ali Bahreini, reinforced this position, declaring that Iran is the sole authority on how to utilise the assets, thereby rejecting the contention that the funds must be directed towards US exports.
Analysts suggest the US proposal serves multiple domestic political objectives, including bolstering support among agricultural sectors affected by trade tensions with China and avoiding the appearance of capitulation to Tehran. Cullen Hendrix of the Peterson Institute for International Economics noted that the structure allows Washington to avoid a straightforward transfer of funds, which might be perceived as a concession. Meanwhile, Mohammad Reza Farzanegan of Philipps-Universitat Marburg argued that the move is designed to extract positive reputation outcomes for the US president and assist farmers hurt by previous trade wars.
The dispute occurs against a backdrop of severely restricted bilateral trade, which totalled $838 million in 2024, largely confined to humanitarian goods and services. While the UN’s Food and Agriculture Organization expects Iran to require approximately 22 million tonnes of cereal imports this year, experts warn that long-term dependence on US exports is unlikely. Hendrix suggested that any large-scale purchases by Tehran would likely be tactical rather than structural, aimed at minimising reliance on the US in a volatile geopolitical environment.
Historical context underscores the complexity of potential trade restoration. Before the 1979 Islamic Revolution, the US and Iran maintained close commercial ties, with Iranian oil exports to the US balanced by American sales of aircraft, machinery, and technology. However, decades of sanctions and political hostility have eroded these relationships. Gary Hufbauer of the Peterson Institute warned that spending conditions would lead to lengthy negotiations, noting that multinational companies remain wary of political flare-ups and credit risks associated with doing business with Iran.
