Summary of Key Points
The United States has recently granted Iran a 60-day temporary permit to conduct oil transactions in US dollars, with the aim of bringing Iran back into the US dollar system and maintaining the dominance of the “petro-dollar.” However, this move faces two major obstacles: first, the legal and technical complexities deter companies from doing business with Iran; second, there is a lack of trust between the United States and Iran on geopolitical grounds, suggesting that Iran may only use the dollar temporarily and not remain in the dollar circle in the long term. Ultimately, the US’s attempt to “strengthen the dollar” is likely to provide Iran with a temporary respite, with limited practical effect.
1. Why Has the United States Relented Towards Iran? – Fear of Losing Control over Petro-Dollar Hegemony
The petro-dollar is a vital part of the US economy: Approximately 80% of global oil trade is settled in dollars, meaning that countries must hold sufficient dollars to purchase oil. This arrangement allows the US to borrow money at lower interest rates (since everyone needs dollars) and helps support its massive budget deficits, essentially providing an implicit subsidy to the US economy.
In recent years, however, sanctioned countries like Iran and Russia have established a “non-dollar oil market,” accounting for 15%-20% of global oil trade, which has weakened the dollar’s position. The US’s concession this time is aimed at bringing Iran back into the dollar system and blocking this alternative channel.
2. What Does the 60-Day Permit Offer to Iran? – The Ability to Sell Oil for Dollars, but with Restrictions on How the Money Can Be Used
The temporary permit allows Iran to produce and sell oil, with buyers able to pay in dollars (until August 21). The US Treasury Secretary claims that this will bring Iran’s oil revenue back into the dollar system (previously, Iran sold discounted oil to China and did not receive dollars for its sales).
However, Trump intends to “control” these funds, possibly restricting them to be used only for purchasing US agricultural products or even requiring them to be placed in US-controlled accounts. Iran has dismissed these claims, indicating that it does not wish to be constrained by the United States.
3. Why Are Companies Afraid to Do Business with Iran? – Legal and Technical Barriers
Iran has been under sanctions for decades, resulting in a complex legal landscape:
- Sanction laws passed by Congress must be repealed through new legislation (which is almost impossible);
- Although executive orders can override these laws, companies are wary of potential risks: Banks and energy firms consider Iran to be high-risk clients and fear fines from the US. For example, oil companies need explicit guidance from the Treasury Department before participating in transactions.
4. Will Iran Truly Stay in the Dollar Circle? – Unresolved Geopolitical Issues
The fundamental reason for the US’s sanctions against Iran is Iran’s challenge to its hegemony in the Middle East. Lifting some sanctions and making Iran wealthier and stronger could only create future problems. More importantly, there is a lack of trust between the two countries: Iran knows that the US could reinstate sanctions at any time. Therefore, even if Iran uses the dollar now, it is likely to switch back to using the Chinese yuan or other currencies once the US’s attention is diverted.
In short, this move is merely a temporary respite for Iran, and the US’s goal of strengthening the dollar is unlikely to be achieved.