American companies have not been able to buy Iranian oil directly since 1987, when President Ronald Reagan banned imports in retaliation for the Tanker War. Congress also banned indirect imports in 1996. But for the next two months, Americans may be putting Iranian oil in their cars, thanks to the ongoing peace negotiations.
Under General License X, the U.S. Treasury has waived all sanctions on the “production, sale, delivery, or offloading of crude oil, petrochemical products, or petroleum products of Iranian origin” from June 22 through August 21. The U.S.-Iranian memorandum of understanding required Iran to stop impeding shipping in the Strait of Hormuz and the U.S. to lift its embargo on Iranian oil for the duration of peace talks, which began in Switzerland over the weekend.
The waiver goes beyond the prewar situation, or even the situation before the first Trump administration began its “maximum pressure” campaign against Iran in 2019. Iran is now allowed to load oil onto American ships, sell to American refineries, and—most importantly—collect the payment in American dollars that passed through the American banking system. It is a sign that the Trump administration is serious about turning the peace process into a comprehensive new relationship.
The administration is also keen on getting oil back into the market after the mutual Iranian and U.S. blockades. President Donald Trump has bragged that the oil market never hit the worst-case scenario of $200 per barrel, but his administration was only able to keep supply high by dumping its emergency stockpile into the market, which wouldn’t last forever. The Strategic Petroleum Reserve is at its lowest level since 1983.
“We run out of reserves at about four weeks,” Trump told reporters last week. Shipping companies have been slow to return to the Persian Gulf. Over the weekend, shipping halted again after the Iranian navy declared that it would close the Strait of Hormuz again in response to Israeli-Lebanese fighting. The fighting quieted down on Saturday night, and the Iranian embassy in Switzerland declared the Strait open again.
Iranian oil exports had already started to resume last week. Even before the U.S. Navy publicly announced the end of the armed blockade on Thursday, tankers were sailing out in anticipation of being allowed to leave. Most of this oil will be headed toward China and India, especially since European sanctions will still keep it out of Europe, says Brett Erickson, managing principal at Obsidian Risk Advisors.
The immediate effect of General License X will be to smooth out payments for Iranian oil. “Allowing purchases in US dollars allows Iran to market oil to smaller buyers without having to rely on u-turn transactions to actually apply the money where it’s needed,” economist Esfandyar Batmanghelidj wrote on X. “Not much use to sell oil for rupees when you need to buy medicine in euros or dollars or supply your FX [foreign exchange] market.”
Trump warned during the 2024 presidential election that overusing sanctions “kills your dollar and kills everything the dollar represents. We have to continue to have that be the world currency.” Professional economists have been making these same warnings for years. U.S. economic sanctions are so effective because so much of the world’s trade happens in dollars, but if the U.S. Treasury bans enough countries from the American banking system, traders will start using other currencies.
Hawks argue that any sanctions relief will go straight to the Iranian military. Just last month, the Treasury claimed that Iran would use its oil revenue for weapons “instead of using this revenue to support the struggling Iranian people,” notes Max Meizlish, a former Treasury official and researcher at the neoconservative Foundation for Defense of Democracies. That’s misleading, according to Batmanghelidj, who points out that most of Iran’s oil export revenue goes straight to paying the country’s import bills. Hence, the importance of getting paid in dollars.
Vice President J.D. Vance, meanwhile, has been portraying Iran’s expected return to the U.S. dollar economy as a win-win scenario. At a press conference after a round of negotiations in Switzerland, he confirmed reporting from the Financial Times and The Wall Street Journal about a proposal (separate from the oil waiver) to use Iranian money frozen in foreign bank accounts to buy American farm goods. “They are going to make American farmers richer and help feed the Iranian people. That’s a very, very good, and very classic Trump deal,” Vance said.
Ultimately, the oil waiver is a sign that the peace process is going well—and that the Trump administration expects to integrate Iran into the American economy in the long term. After all, the peace memorandum envisions foreign investors (including American companies) putting $300 billion into Iran during reconstruction. It is a stunning turnaround from just a few months ago, when the U.S. and Iran were threatening each other with mutual economic destruction.
“Everyone is focused on what Iran might earn during the initial sixty days. That’s the wrong question,” Erickson says. “The real question is whether sixty days becomes six months, six months becomes two years, and a temporary waiver becomes a permanent policy. If that happens, the first billion dollars will be remembered as the down payment, not the prize.”
