The memorandum that the US and Iran are set to sign in Geneva on Friday to reopen the Strait of Hormuz is likely to keep the sanctions architecture governing Iranian and Russian crude alive in a different form, run through temporary waivers that Washington can extend, shorten, or revoke at will.
US officials say the MoU keeps Hormuz "toll-free for 60 days" and lifts the naval blockade in proportion to the restoration of commercial traffic. Iranian state media describe a 14-point draft that lifts oil sanctions outright, releases $24 billion to $25 billion in frozen assets over a 60-day window, and commits the US and Gulf partners to a reconstruction fund of at least $300 billion. Washington denies Iran gets frozen cash simply for signing, and the version of the text seen by Bloomberg ties the $300 billion to a final deal, not the MoU.
Rachel Ziemba, founder of US-based geopolitical risk firm Ziemba Insights, expects Washington to rely on waivers permitting sales rather than lifting sanctions, a choice that "will limit who will be willing to buy and likely keep China the main buyer," while controls tied to Iran's drone programme and human rights remain. That creates a structural flaw, she noted, as Iran "may struggle to spend the funds they earn," handing Tehran grounds to argue the US is not holding up its end. The US could also simply halt the blockade and let Iranian vessels pass while keeping sanctions in force, an outcome that would revive China's discounting power and deny Iran the choice of who to sell to.
"Sanctions are easy to enforce, but they are extremely hard to withdraw," said Amit Bhandari, senior fellow at Mumbai-based Gateway House, who expects Iranian barrels to flow again once interceptions stop, but in a constrained form recalling the pre-2019 period, when buying Iranian crude was "credible, but it was not preferred."
Whether Iran can extract value at the chokepoint is equally unclear. Kabir Taneja, executive director of ORF Middle East, expects Iran and Oman to reach an arrangement on charging a toll for use of the strait. "If ship owners and shipping companies come to some sort of conclusion that we are going to be paying this for ships to travel, then others will follow," he said, warning that the selling and purchase of oil, as opposed to its mere transport, "has not been figured out yet."
The sanctions themselves are codified and not easily unwound. OFAC enforces Iranian oil restrictions under executive orders rooted in the 2018 reimposition that followed US withdrawal from the JCPOA. It is layered with secondary designations on shadow-fleet tankers, front companies and Iran's Revolutionary Guard Corps. Russian crude sits under a parallel regime of the G7 price cap, OFAC vessel designations and EU import bans. None of it lapses with a ceasefire, and removal is slower and more contested than imposition, leaving the waiver as the fastest lever Washington holds.
A US official speaking to Axios indicated the potential arrangement that could follow the signing of the framework as one of temporary waivers allowing Iran to sell oil only as long as talks continue. The White House has described its broader approach as a "pay for performance" structure, in which sanctions relief is offered in exchange for Iranian compliance.
The US' enforcement of sanctions along the strait has turned lethal in recent days. In the week before the framework, US Central Command struck a series of tankers it said had violated the blockade, "disabling" nine vessels and turning back 135 others. Three Indian sailors were killed aboard the Palau-flagged Settebello. The Marivex, a tanker named in OFAC's shadow-fleet designations, was hit by a precision munition from an F/A-18 off the carrier Abraham Lincoln. India lodged a formal protest, summoned a US diplomat and demanded safe navigation through the strait. An OFAC designation, which was once an administrative label, had become grounds for the use of force against civilian crews.
Washington's preferred template, analysts say, is a phased waiver. Vandana Hari, founder of Singapore-based Vanda Insights, expects the US to revert to the system it used in earlier rounds, when about half a dozen Asian buyers received exemptions alongside China. "The US would stick to the same template and allow certain countries to lift pre-agreed volumes over a certain period of time," she said. "Appointing the countries to buy gives the US better clarity and visibility into where the oil is going, because the US can then hold the other countries that have got the waivers responsible as well."
India's data shows how thin the appetite has become. After seven years of zero purchases, India imported 133,000 barrels per day in April from Iran under a US wartime waiver the Treasury Department called a “stopgap”. Russian crude has had a different trajectory in India, holding between about one million and 2.35 million bpd across the same period, according to Kpler. June imports, though tentative, are tracking towards an all-time high, set to surpass the previous record of 2.16 million bpd reached in May 2023. When Iranian barrels were briefly allowed, the ample availability of discounted Russian crude blunted any incentive to return to Tehran.
That Russian channel now faces its own squeeze. Britain has set January 1, 2027 as the end date for imports of diesel and jet fuel refined from Russian crude in third countries, a measure aimed squarely at refiners in India and Turkey that process discounted Russian oil for western markets. Between Washington's calibrated waivers and London's tightening of the refined-products loophole, buyers confront a sanctions regime that is less a fixed rule book than a set of levers, pulled at convenience.
Data visualisation by Isaac Arroyo
