WASHINGTON – The U.S. Department of the Treasury will utilize frozen Iranian assets to fund the reconstruction of infrastructure in Gulf allies damaged by attacks from Tehran, according to officials familiar with the administration’s strategy.
Treasury Secretary Scott Bessent has directed the department to identify and employ all available legal authorities to make these assets accessible for repair efforts related to future damage inflicted by the Iranian regime.
The move marks a significant escalation in the financial pressure placed on Tehran, transitioning from the use of sanctions as a deterrent to the use of seized assets as a direct source of reparations for regional partners.
Reparations and Cost Assessment
Secretary Bessent has ordered the Treasury to obtain comprehensive cost estimates from Gulf allies to determine the total financial impact of damage sustained since the conflict began. Officials said the assessment is intended to create a standardized, documented basis for any future claims on Iranian funds.
The department is currently evaluating whether existing Iranian assets can be applied retroactively to finance repairs for damage already incurred by these nations, a step that would effectively convert frozen holdings into a standing compensation pool.
While the specific nature of the assets has not been disclosed, the Treasury is considering several categories of frozen holdings, including:
- Cash reserves held in frozen overseas bank accounts.
- Hard assets, such as seized oil tankers.
Any use of the assets would be structured under U.S. sanctions law overseen by the Treasury’s Office of Foreign Assets Control and anchored in authorities provided by the International Emergency Economic Powers Act, according to people briefed on the deliberations.
Regional Conflict and Targets
The initiative follows a period of instability that began in late February, when the conflict broke out. Since then, Iran has conducted intermittent missile and drone strikes targeting all six Gulf states, hitting energy infrastructure, ports, and key logistics corridors that underpin global oil and gas flows.
The affected nations include:
- Saudi Arabia
- United Arab Emirates
- Kuwait
- Bahrain
- Qatar
- Oman
U.S. officials say channeling Iranian assets into rebuilding efforts is meant to reassure those governments that Washington is prepared to underwrite long-term recovery, not only short-term military support, and to deter further attacks by raising the direct financial cost to Tehran.
Impact on Peace Negotiations
The decision to earmark these assets for reconstruction comes as the U.S. and Iran continue indirect peace talks brokered through European and regional intermediaries. The asset plan, officials acknowledge, will now sit alongside security guarantees and nuclear commitments as a core point of contention in the negotiations.
Tehran has maintained that any successful diplomatic agreement must include the comprehensive lifting of sanctions. A primary demand from the Iranian government is the release of billions of dollars in frozen assets currently held abroad, funds it argues are needed to stabilize its economy and import food and medicine.
The Treasury’s plan to redirect these funds toward the reconstruction of Gulf allies creates a direct conflict with Iran’s stated requirements for a peace deal and could force negotiators to weigh partial releases or phased access to specific accounts.
The Treasury Department is currently awaiting the submission of repair estimates from the affected Gulf governments. Once those figures are received, officials say the administration will outline a more detailed framework for how claims would be validated, prioritized and disbursed, including potential coordination with international financial institutions and existing mechanisms used to administer oil-related compensation claims, such as those previously handled by the United Nations Compensation Commission.
