As negotiations continue toward a final deal to end the Middle East war, the United States announced it has developed a spending plan for unfrozen Iranian assets.
President Donald Trump’s administration claims that the unfrozen funds will be used to buy U.S. agricultural products and then provided to Iran.
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The end result could be a $12 billion weapon injection into currently severely restricted bilateral trade between the United States and Iran, which is largely limited to humanitarian goods.
Over the past 50 years, relations between the United States and Iran have largely declined, from close trading partners to arch-rivals.
Can President Trump restore trade ties with Tehran, no matter how far-fetched the idea may seem?
What’s happening with Iran’s frozen assets?
As with many things in the U.S.-Iranian negotiations, the two countries do not appear to be completely on the same page about the terms of the deal so far.
Following the signing of a Memorandum of Understanding (MoU) between the United States and Iran last week, and after the first round of talks in Switzerland on Monday, Iran’s top negotiator, Mohammed Bagher Ghalibaf, said an agreement had been reached to release $12 billion in frozen Iranian funds.
However, US Vice President JD Vance said that once Iranian assets are unfrozen, Iran will use those assets to purchase US agricultural products. “They are going to enrich American farmers and feed the Iranian people,” he said.
President Trump added, “We’re doing very well in terms of negotiating a fair and reasonable deal. … The corn, the soybeans, everything they need is going to be bought from our farmers. So our farmers are very happy. I had a lot of calls and they were very happy about this.”
The next day, President Trump posted on Truth Social: “The funds and sanctions released by the U.S. Treasury will be held in a U.S.-controlled escrow and will be used only to purchase food and medicine, including corn, wheat, and soybeans, from our great American farmers, which Iran desperately needs.”
“We feel this is a humanitarian crisis and we need to help now before it is too late. Negotiations are progressing well!”
However, Iran has never acknowledged that it has agreed to this.
Iranian Foreign Ministry Spokesperson Esmail Baghai said these assets “will be used and released by Iran completely freely to purchase goods and goods needed by the nation.”
He added that purchases of agricultural products will be based on “price and quality” and not on terms “dictated by the U.S. government.”
“It’s interesting that the philosophy and purpose of the war – the destruction of Iranian civilization and the collapse of Iran – ended up enriching American farmers,” Baghaei said.
Iran’s ambassador in Geneva, Ali Bareini, also rejected the US claim, saying: “Iran alone decides what to do with these assets.”
How is this agreed upon?
“Any attempt to impose spending conditions on unfrozen Iranian assets will likely lead to lengthy negotiations,” said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.
Indeed, he told Al Jazeera, “Many members of Congress oppose the Iran deal, and multinational companies will be wary of further political escalation and credit risks in doing business with Iran.”
Mohammad Reza Farzanegan, an economist and professor at Germany’s Philipp University of Marburg, said the US president has a strong incentive to force Iran to buy American products “to extract something positive for his reputation from this illegal war against Iran.”
U.S. farmers, especially soybean exporters, have been hurt by President Trump’s trade war with China, economists said. “By redirecting Iran’s frozen assets to purchase U.S. agricultural products, the U.S. government could view sanctions relief as humanitarian trade, but in reality, this is a move to increase its popularity among the U.S. social support base,” he said.
Karen Hendricks, a senior fellow at the Washington-based think tank the Peterson Institute for International Economics, said the U.S. proposal could also be a way to “avoid sending funds directly to Iran, which could be seen as U.S. capitulation.”
Do the US and Iran actually trade?
yes. Despite deteriorating relations and decades of sanctions, the United States and Iran maintain a small but durable trade relationship, with trade surpluses significantly favoring the United States.
Direct trade remains small by international standards, as extensive US sanctions restrict most commercial activities. Most of what is traded is concentrated in humanitarian and sanctions-exempt sectors such as medicines, medical devices, and agricultural products.
According to the US government, total trade in goods and services between the US and Iran in 2024 will be $838 million, an increase of 3% from 2023.
The bulk of this, $742 million, was in the form of services, of which nearly $600 million was from U.S. trade to Iran. Almost all of the goods traded were US goods exported to Iran.
Could a peace deal revive U.S.-Iran trade relations?
Analysts told Al Jazeera that neither Washington nor the Iranian government appears to be willing to sell such a deal domestically, making it unlikely to re-establish broader trade ties.
However, there are several areas where the two countries could clash in the middle.
Hendricks told Al Jazeera that if Iran “starts making large-scale purchases of agricultural products, corn and soybeans are likely targets, but not in a way that permanently increases Iran’s dependence on U.S. exports.”
The dynamics of the war are not quite over, and while both sides have said they are prepared to resume full-scale war if talks fail, “even America’s own allies are nervous about putting all their eggs in America’s basket. The logic of minimizing dependence on the United States as an adversary is even more compelling,” Hendricks said.
Even if Iran is forced to buy some U.S. goods, he added, Iran “does not intend to lock in its dependence on U.S. exports into its food system. The U.S. should expect superficial tactical compliance at best, rather than becoming a pillar of Iran’s food security.”
Farzanegan told Al Jazeera that realistic trade options between the United States and Iran are limited, including food, agricultural products, pharmaceuticals, medical devices, and some related chemical and health products.
“Agricultural trade could include wheat, corn, soybeans or soybean meal, rice and feed, especially given Iran’s import needs,” he said, adding that the UN Food and Agriculture Organization expects Iran to need to import around 22 million tonnes of grain this year, which already equates to a multi-billion dollar bill.
Hufbauer said the Iranian government could export crude oil and refined petroleum products to the United States at competitive prices.
What is the history of trade between the US and Iran?
Before the 1979 Islamic Revolution, Tehran was one of Washington’s closest allies in the Middle East, and trade expanded rapidly from the 1950s to the late 1970s.
In 1953, the United States helped reestablish the government of Shah Mohammad Reza Pahlavi through the overthrow of democratically elected Prime Minister Mohammad Mosaddegh, who wanted to nationalize the oil industry.
Washington’s trade relationship with Pahlavi was driven by exports of Iranian oil to the United States, while the United States sold aircraft, advanced military equipment, industrial machinery, automobiles, agricultural products, and technology to Iran.
American companies such as Boeing, General Electric, and Bell Textron had significant business interests in Iran until 1979, when Ruhollah Khomeini overthrew the Shah dynasty in the Islamic Revolution.
During the 444-day hostage crisis at the U.S. Embassy in Tehran in 1979, then-U.S. President Jimmy Carter froze billions of dollars in Iranian assets and banned Iranian imports to the United States.
In 1995, then-US President Bill Clinton issued an executive order imposing a total trade ban.
Secondary sanctions against Iran were lifted by the 2015 Joint Comprehensive Plan of Action signed between Iran and the Obama administration in the United States and other countries to limit Iran’s nuclear program. However, Trump withdrew the United States from the agreement during his first term as president in 2018.
