US-Iran talks: Calibrated sanctions relief could boost regional stability

As the fragile ceasefire holds in the wake of the 40-day Iran-US/Israel conflict, negotiators meeting in Islamabad, alongside parallel exchanges through Swiss and other intermediary channels, are once again confronting a central and enduring fault line in US-Iran relations: the potential release of billions of dollars in Iranian assets frozen under years of American sanctions. With Tehran conditioning the reopening of the Strait of Hormuz and a reduction in proxy activities on sanctions relief, Washington faces a familiar strategic dilemma.

The question of unfrozen assets is not new. Under the 2015 Joint Comprehensive Plan of Action, Iran regained access to previously restricted funds, often cited at up to $150 billion. These resources provided Tehran with significant financial latitude. Rather than translating into broad-based domestic recovery, however, a portion of these funds appears to have supported Iran’s regional posture, including its network of proxies.

Survey data from 2018 indicates that 75 percent of Iranians believed that socioeconomic conditions had not improved as a result of the JCPOA, while many perceived that the available funds disproportionately benefited well-connected elites or were diverted abroad to support proxy networks, military activities and broader belligerent ambitions.

The risk is that unconditional sanctions relief could once again reinforce Iran’s external projection of power

Dr. Mohammed Al-Sulami

This experience has shaped enduring skepticism in US policy circles, particularly during the presidency of Donald Trump, who has consistently argued that sanctions relief strengthened Iran’s missile capabilities, proxy networks and regional influence.

In the current context, the risk is that unconditional sanctions relief could once again reinforce Iran’s external projection of power rather than stabilize its domestic economy. This concern is particularly acute given the continued volatility of Gulf security and the lingering effects of disruptions in the Strait of Hormuz on global energy markets.

At the same time, Iran’s framing of the issue has evolved. What initially appeared to be a request for access to approximately $6 billion in restricted funds has expanded significantly, with Iranian sources now suggesting that as much as $27 billion remains frozen across multiple jurisdictions. The scale of these demands has elevated the issue from a secondary bargaining tool to a central pillar of negotiations.

A more prudent approach would be to structure sanctions relief in a conditional and incremental manner. Rather than granting immediate and comprehensive access to frozen assets, financial releases could be phased and explicitly linked to verifiable de-escalation measures. Initial tranches might be conditioned on concrete steps such as reducing material support to regional proxies or refraining from actions that threaten maritime security. Subsequent phases could depend on sustained behavioral changes, monitored through strengthened international mechanisms. In parallel, credible and automatic “snapback” provisions would be essential to ensure that any breach of commitments triggers the rapid reimposition of sanctions.

Such an approach would directly address one of the principal criticisms of the JCPOA: the imbalance between front-loaded economic benefits and delayed or uncertain enforcement of behavioral constraints. By contrast, a phased framework would preserve leverage over time and reduce the risk of unintended strategic consequences. It would also resonate with elements of the “maximum pressure” policy, which previously constrained Iran’s economic capacity and, by extension, its regional activities prior to this year’s escalation.

The role of international partners will be critical in determining whether such a framework can be implemented effectively. European actors, particularly France, Germany and the UK, have historically sought to preserve diplomatic engagement with Iran while maintaining the core structure of the nuclear agreement. In the current negotiations, they are well positioned to advocate for a more conditional model of sanctions relief. By aligning their financial channels and regulatory frameworks with measurable benchmarks of Iranian behavior, European governments could reinforce US leverage while maintaining diplomatic cohesion.

A more prudent approach would be to structure sanctions relief in a conditional and incremental manner

Dr. Mohammed Al-Sulami

Beyond Europe, major Asian energy importers, including China, India and South Korea, also have a direct stake in the outcome. China, which maintained limited Iranian oil flows during the crisis, could play a constructive role by endorsing a phased approach to sanctions relief tied to clear behavioral conditions. A broader alignment among G7 and Gulf Cooperation Council states, supported by transparent benchmarks and multilateral oversight, would strengthen the credibility of this strategy.

Ultimately, the issue of frozen assets extends well beyond Iran’s immediate economic needs. Unconditional access to these funds risks rewarding the very forms of hybrid warfare that contributed to the recent crisis, including disruptions to critical shipping lanes and sharp increases in global oil prices. It could also reinforce hard-line factions within Iran’s political system that interpret economic concessions as evidence of external weakness rather than as incentives for policy adjustment.

Conversely, a calibrated, behavior-linked framework offers a more sustainable path forward. By maintaining financial leverage while providing a clear pathway for incremental relief, such an approach could help reduce tensions without sacrificing strategic objectives. For Washington, this represents both a challenge and an opportunity. Having long emphasized the risks associated with unconditional sanctions relief, the current US administration now faces the task of translating that critique into a workable diplomatic framework.

The broader lesson is clear: sanctions relief is not an end in itself but a policy instrument that must be carefully designed and rigorously enforced. If structured without sufficient safeguards, it risks exacerbating the very dynamics it seeks to mitigate. If, however, it is embedded within a conditional and verifiable framework, it may contribute to a more stable regional equilibrium.

The outcome of the current negotiations will therefore not only shape the trajectory of US-Iran relations but also signal whether the international community has effectively internalized the lessons of the past decade.

• Dr. Mohammed Al-Sulami is the founder and president of the International Institute for Iranian Studies (Rasanah). X: @mohalsulami