An agreement by the Obama administration to send $1.7 billion to Tehran around the same time that it reached a sweeping deal to curtail Iran’s nuclear program drew fierce backlash from Republicans, including Donald J. Trump.
A decade later, the Trump administration is on the defensive as it tries to justify temporarily lifting sanctions on 140 million barrels of Iranian oil that is currently sitting at sea. With oil prices hovering around $100 a barrel, the sanctions relief, which is intended to boost global supplies of crude to ease energy prices, could give Iran a $14 billion windfall at the same time the U.S. is waging a war on the country.
“The result of all of this is they are conceding the fact that the Iranians have leverage over whether the U.S. can continue to prosecute the war,” said Richard Nephew, a former State Department and National Security Council official in the Obama administration who helped negotiate the Iran nuclear agreement. “You have gone to the Iranians and told them, ‘You have our Achilles’ heel.’”
He added: “This is asking them to please, please, please sell oil because the market is going haywire.”
Oil prices have surged since the U.S. and Israel attacked Iran, posing an economic and political liability for Mr. Trump ahead of the midterm elections. As a result, his administration has been pursuing every option to mitigate the fallout. According to AAA, average U.S. gas prices are $3.95 per gallon, up from $2.94 a month ago.
But the Trump administration has struggled to articulate the logic of the “general license” that the Treasury Department issued late last Friday. The sanctions exemption allows Iranian oil to be sold to most countries, including the United States, for the next month. The sanctions relief for Iran followed a similar reprieve this month allowing sanctioned Russian oil that is currently at sea to be sold.
Treasury Secretary Scott Bessent, who announced the issuance of the Iran exemption, described the move as an act of martial artistry.
“In essence, we are Jiu-Jitsuing the Iranians,” Mr. Bessent said on NBC’s Meet the Press program on Sunday. “We are using their own oil against them.”
If freeing up Iranian oil successfully lowers global crude prices and buys the U.S. more time to topple the Iranian government, then Mr. Bessent’s plan could prove to be fruitful. However, it is not clear that easing Iran oil sanctions will lower prices or how expanding the pool of potential buyers of its oil will prevent Iran from profiting off from the volatility caused by the war.
Mr. Bessent appeared to argue that by infusing global markets with more Iranian oil, it will reduce the amount of money that Iran could get by selling sanctioned oil to countries such as China at a discounted price if global prices climb even higher. He also said that the United States would be able to track those transactions and block the money from reaching Iranian accounts.
“At Treasury when this oil goes to — if it goes to Indonesia, if it goes to Japan, if it goes to Korea, we have a much better line of sight and are able to block accounts that the oil goes into,” Mr. Bessent said.
However, the license that Treasury issued did not appear to indicate that the transactions could be blocked by the United States. The sanctions exemptions continue to forbid Iranian oil from being sold to North Korea, Cuba or parts of Ukraine that are occupied by Russia. It applies to oil loaded on vessels as of March 20 and extends until April 19.
Iran exports most of its oil to China and much of it is transported on its “shadow fleet” of tankers that seek to evade U.S. sanctions. Because Iranian oil exports operate largely in a gray market, it is not clear how much of its crude that is at sea is available to be diverted to other countries.
If the Treasury Department plans to ultimately block the transactions, it could deter Iran from selling oil to other nations and undercut Mr. Bessent’s argument that the plan will boost oil supplies.
The Foundation for the Defense of Democracies, a group that urges a close U.S. partnership with Israel and confrontation with Iran, noted that the license contained “no escrow mechanism and no obvious restrictions on payment channels.”
Asked on NBC about the ultimate effect of the sanctions relief on oil prices, Mr. Bessent called the question “terrible framing.”
The Treasury Department and the White House had no comment on Mr. Bessent’s remarks.
Mr. Trump said on Monday that he did not believe Iran would get much money from additional oil sales and that he wants as much oil as possible to be available.
“Any small amount of money that Iran gets is not going to have any difference in this war,” Mr. Trump said as he left the White House. “But I want to have the system be lubricated.”
Democrats have been quick to point out the irony of Mr. Trump offering Iran what could amount to billions of dollars worth of sanctions relief while the fighting continues.
In 2016, when Mr. Trump was a presidential candidate, he called the first $400 million installment of the $1.7 billion payment to Iran a “scandal” and blamed his opponent, Hillary Clinton, for supporting it. Marco Rubio, the secretary of state who was then a Republican senator from Florida, described transfer of funds as an “outrage.” On social media, “pallets of cash” trended as an attack on Democrats.
“I remember when my Republican colleagues blasted Barack Obama over $400m tied to hostages and an old debt with Iran,” Senator Mark Warner, a Virginia Democrat, wrote on X. “Where’s the outrage now?”
The office of Gov. Gavin Newsom of California, a Democrat who has been sharply critical of the Trump administration, posted a photo of Mr. Trump and Defense Secretary Pete Hegseth unloading a truck full of cash. The caption read, “Remember when MAGA melted down over Obama’s imaginary ‘pallets of cash’ to Iran? Now Trump’s doing it for real — and not a peep.”
Mr. Trump’s attacks on former President Barack Obama over the payments to Iran were fresh in his mind last week. Recalling his decision to terminate the nuclear deal with Iran during his first term, Mr. Trump likened the payments made by the Obama administration to a “ransom” and revived his criticism that cash was drawn from U.S. banks and flown to Iran on Boeing 757 planes.
The payments to Iran at that time were intended to put to rest a dispute over a $400 million arms deal that Washington had reached with Iran when the shah of Iran, Mohammad Reza Pahlavi, was still in power. When he was overthrown in 1979, the United States stopped delivery of the weapons but never returned the money.
The Obama administration determined that it had to repay the money in cash because banks were concerned about violating sanctions by executing a wire transfer.
“Remember when they sent Boeing 757s over there, loaded with cash?” Mr. Trump said, three days before lifting sanctions on Iran. “That’s not going to happen with Trump.”
Tony Romm contributed reporting.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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