According to numerous statements by negotiators and other officials, talks in Vienna to restore full compliance with the 2015 Joint Comprehensive Plan of Action multilateral nuclear deal with Iran were close to agreement in early March. However, new demands from Russia to exempt Ukraine-related sanctions from its trade with Iran have caused a suspension in the talks. Iran’s claim of responsibility for a March 13 missile attack on U.S. facilities in Erbil, in Kurdish-controlled northern Iraq, could further complicate the talks, if and when they resume. A final accord would entail the easing of all U.S. economic sanctions that were lifted in early 2016 with the implementation of the original agreement (and had been reimposed when the United States pulled out of the agreement in 2018). Also, according to U.S. officials, additional sanctions imposed on Iranian economic entities and sectors from 2018-20, to the extent they are “inconsistent” with the 2015 JCPOA, would also be lifted.

An easing of all JCPOA-specified sanctions will presumably be acceptable to Tehran in the context of a limited deal to restore the existing JCPOA. Over a longer term, however, this level of sanctions relief will likely disappoint Iranian leaders and set the stage for further dispute. JCPOA-mandated sanctions relief does not allow Iranian banks and companies access to the U.S. financial system, which is by far the world’s largest. Despite the emergence of rival economic powers, such as China, the U.S. dollar remains the world’s preeminent reserve currency. Iran will want access to the U.S. financial system, particularly as large, dollar-denominated transactions such as those for oil and gas regain prominence as a source of Iran’s revenue in a post-sanctions landscape. From 2016-18, the period when both Iran and the United States were fully implementing the JCPOA, Iranian officials cited the denial of Iranian access to the U.S. financial system to argue that Iran was not getting the full promised benefits of the JCPOA. In 2016, the administration of President Barack Obama reportedly considered addressing the Iranian complaint by licensing certain foreign exchange institutions to process dollar-denominated transactions with Iran but ultimately declined to take that step.

Reopening the U.S. financial system to Iran might be one incentive to offer Iran in possible follow-on talks, subsequent to a JCPOA restoration, to address Iran’s missile program and possibly also its support for regional armed factions. A restoration of Iranian access to the U.S. financial system would open Iran to a far broader range of international financing for trade and investment by enabling foreign banks to access the vast U.S.-based dollar liquidity for Iran-related transactions. If Iran were to obtain free and unfettered access to the U.S. financial system, Iranian leaders could anticipate significant increases in economic growth – possibly beyond the double-digit gross domestic product growth rate achieved in the year after JCPOA-related sanctions were eased in January 2016.

Yet, even if offered, this sanctions relief might be difficult to put into practice. Iranian officials reportedly fear that any Iran-related funds that move through the U.S. financial system risk being impounded by the U.S. government or U.S. courts. Several baskets of Iranian assets already have been frozen in the United States. The U.S. government has sought for several years, through unsuccessful court action, to impound an additional nearly $2 billion in assets of the Central Bank of Iran that were moved out of a New York-based account to a Luxembourg-based account. The U.S. asset freezes and attempted freezes have caused central bank officials to hesitate to agree to any dollar transaction in which amounts due to Iran have to pass through the U.S. financial system. Iran’s concerns about potential asset seizures by the United States hindered the implementation of proposals for selected releases of funds from Iranian central bank accounts in South Korea, Oman, Iraq, and other countries in 2021. Iranian leaders likely would view any U.S. executive orders, new regulations, or public promises not to block any additional Iranian funds as insufficient assurance that their funds would have safe passage through U.S. banks.

The Iranians’ concerns about their funds’ movement through the U.S. financial system stem, in part, from a perception that the United States will attempt to block Iran’s funds in order to pay awards that U.S. courts have made to families of the victims of acts of terrorism allegedly backed by Iran. Victims of terrorist attacks have had significant successes winning court judgments against Iran and other countries for monetary compensation. Among those who have received court awards from Iran are U.S. diplomats held hostage in Iran from 1979-81; families of victims of the 1983 bombing of a Marine barracks in Beirut, Lebanon; families of some U.S. citizens injured in attacks by the Palestinian Islamist groups Hamas and Palestinian Islamic Jihad; and families of the victims of the September 11, 2001 attacks on the United States. Iranian leaders and many experts reportedly were surprised by the September 11-related judgment against Iran, in part because the September 11 Commission report stated that the commission had found “no evidence that Iran or Hezbollah was aware of the planning for what later became the 9/11 attack.” Tehran might have seen potential parallels in the February U.S. decision to potentially allow some frozen assets of Afghanistan’s central bank to be used, subject to further court action, to compensate families of the victims of the September 11 attacks who won financial judgments against the Taliban, which seized control of Afghanistan in August 2021.

A resolution of the court judgments such as those mentioned above might be required to reopen the U.S. financial system to Iranian banks. However, there might not be a clear roadmap to doing so, particularly insofar as Tehran has repeatedly refused to recognize the validity of any U.S. judgments against it for acts of terrorism by it or any of its regional allies. On the other hand, a return to the 2015 JCPOA might eventually produce a broader improvement in U.S.-Iranian relations and perhaps pave the way for an eventual resolution of Iranian concerns about its funds accessing the U.S. financial system.