Unraveling Iran’s puzzle of assets frozen abroad

For years, Iran has been grappling with the challenge of how to repatriate its assets frozen in various countries under the US pressure.

The United States has long used sanctions to cripple Iran, including through impeding access to its foreign exchange reserves which are important for the normal operation of the economy.

Foreign exchange reserves, among other things, are crucial to the management of the exchange rate which takes its cue from the supply of foreign currencies available in the market.

Any problems on the way of access to these reserves result in the Iranian rial losing its value while Iranian companies, which need to sell rials and buy euros, yen or other currencies to purchase goods and services from foreign suppliers, have to do so at higher costs, feeding into inflation.

The dollar has been rallying against the rial since trading around 690,000 rials at the time of US President Donald Trump's re-election in November. Recently, the rial dropped to a new all-time low of 930,000 for each dollar after he signed an order to re-impose his "maximum pressure" policy against Iran with tougher sanctions.

“With Trump's signing, our country's oil tankers and gas ships are left adrift, wondering how to get their shipments to their destinations. Iraq, Türkiye, and other countries are not paying back their debts to Iran,” President Masoud Pezeshkian said on Sunday.

He made the remarks to parliament before it voted to dismiss finance minister Abdolnasser Hemmati over the crashing rial. The dismissal came after some lawmakers argued that rising inflation and exchange rates were not the fault of the current government or parliament.

Before the impeachment, Pezeshkian took the podium to declare that the government was locked in a tough battle with the West, calling for greater unity and cooperation from parliament to face challenges.

The development was another chapter in Iran’s struggle to navigate challenges resulting from foreign pressures to the normal functioning of its economy - an obvious right of every sovereign nation. 

From billions of dollars in oil and gas revenues held in China, Turkey, India and Iraq to money frozen in Japan, Qatar, Luxembourg, Canada, Oman and the UAE, the Islamic Republic has seen its funds from the sale of oil and gas blocked under the pretext of sanctions, while others are under strict surveillance and restrictions.

There are no precise and official statistics on the total sum. Prior estimates have suggested that Iran has foreign reserves of well over $100 billion abroad. Media reports have put them at $40-50 billion.

When Qatari Emir Sheikh Tamim bin Hamad Al Thani called on Ayatollah Seyyed Ali Khamenei in Tehran last month, the Leader of the Islamic Revolution asked the Persian Gulf emirate to release $6 billion in Iranian oil revenues held in Doha, despite US pressure not to do so.

The oil money frozen in South Korean bank accounts in 2019 was transferred to Qatari in September 2023 to be used by Iran for humanitarian purposes, but the US ordered the Arab emirate to block it, a week after Hamas launched its Oct. 7 operation inside southern Israeli occupied territories.

“If we were in Qatar's place, we wouldn't pay attention to the pressures brought by the US and would return Iran's assets,” Ayatollah Khamenei told Sheikh Tamim in Tehran. “We continue to expect Qatar to do this.”

Last December, former housing minister Abbas Akhundi stated that China was holding $21 billion of Iranian oil money in an escrow account and had proposed to activate it as credit facility for development projects in the Islamic Republic.

In 2023, the United States issued a sanctions waiver allowing Iraq to pay over $2.7 billion of the $11 billion it owed Tehran for importing electricity and natural gas. The money, however, had to be transferred to Omani banks for purchases of goods such as food and medicine by Iran under US supervision.

Also, a historic $530 debt the UK paid Iran in 2022 after 40 years was blocked in Oman, reports at the time said. Britain owed the money to Iran for 1,750 Chieftain tanks and other vehicles purchased before the Islamic Revolution of 1979 almost none of which were delivered.

Meanwhile, $1.7 billion of Iranian assets held by Deutsche Boerse's Clearstream unit in Luxembourg have faced lawsuits filed in the US seeking to seize them.   

The need to free Iran’s economy from bondage of dollar

Iran’s parliament has already come up with a plan to reduce the dependence of the economy on the dollar and pivot to national currencies in foreign trade.

Repatriating Iran’s debts is one side of the coin, but the other side is protecting the economy from the adverse effects of sanctions through protecting the national currency and investment in key infrastructure such as energy.  

Despite the constraints, part of Iran’s subsidized currency allocated for imports of essentials goods ends up in purchasing "luxury" items ranging from cars and motorcycles to various brands of cell phones, cosmetics, toilet paper, and gourmet food item.

Efforts to bring home assets through proactive diplomacy should be coupled with other measures to remove the dollar from Iran’s foreign reserves and transactions and replace it with other emerging standard currencies such as the yuan and even the ruble and promote them in trade with the regional countries.

Moreover, the repatriated assets should be invested in added value production in order to free the country from reliance on raw exports such as oil and gas and generate new jobs.

Just as in its military industries and some avant garde sciences such as stem cells and nanotechnology, Iran can achieve self-sufficiency in the critical sectors which are the target of the most cruel sanctions in human history.   

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