A cargo ship off the coast of Fujairah in the northern Emirates. (Photo: Giuseppe Cacace/AFP)
The US announced on Monday that ships will be able to pass toll-free through the Strait of Hormuz under a new peace deal with Iran.
However, the US says that Iran must first fulfill its obligations before any economic benefits will be made available.
US officials say the possible release of funds and a proposed reconstruction fund of around $300 billion (more than R5.3 billion) for Iran will be strictly linked to the country’s compliance with the agreement.
The memorandum of understanding (MoU) was signed electronically on Sunday by Pres. Donald Trump of America, JD Vance and Mohammad-Bagher Ghalibaf, Speaker of Iran’s Parliament.
According to a senior US official, Trump wanted to personally sign the document to show his commitment to the peace process.
However, Vance admitted that the short agreement of about one page postpones many of the more difficult issues, especially Iran’s nuclear program, for further negotiation.
He told CNN the document contained only general principles, but later explained to NBC that US and international nuclear inspectors would be allowed back into Iran to help destroy the country’s stockpile of highly enriched uranium.
Vance will lead technical negotiations this week and also attend a formal signing ceremony in Geneva, Switzerland.
Trump, who is currently attending the G7 summit in France, said the content of the agreement would likely be announced after Friday, although US officials indicated it could be published as early as within the next 24 to 48 hours.
Focus on Hormoes
The signing of the memorandum refers to a period of 60 days in which the US and Iran will attempt to finalize a comprehensive peace agreement.
According to US officials, nuclear negotiations remain the highest priority, but the immediate reopening of the Strait of Hormuz is critical because of its influence on oil prices and international trade worldwide.
Vance told CNBC that there is an understanding that the strait will be reopened on a permanent, toll-free basis. However, the exact details will be worked out during technical negotiations.
Trump, for his part, said the important strait should be “completely open” by Friday.
US officials expect shipping traffic to return to pre-war levels within the next few weeks. They say there is already a significant increase in traffic through the strait.
However, Iran’s foreign ministry indicated on Monday that the agreement would still allow the country to charge maritime service fees from ships, rather than formal tolls.
Pres. Donald Trump (Photo: Kyle Mazza/NurPhoto via AFP)
No funds released yet
Uncertainty also exists over Iran’s access to funds and possible relief from international sanctions.
This is a politically sensitive issue for Trump, who has been arguing for some time that the nuclear deal that was concluded during the presidency of Barack Obama and which he scrapped in 2018, offered Iran too many financial benefits.
U.S. officials said no funds have been released by the U.S. or any other country so far.
According to them, various possibilities have been discussed, including the release of funds, sanctions relief and the proposed reconstruction fund of $300 billion, but all will depend on Iran’s compliance with the agreement.
Vance, meanwhile, said that no US tax money would be paid to Iran.
He believes that the lifting of certain sanctions can have economic benefits by making Iran part of the international economy again.
As part of the preliminary agreement, inspectors from the International Atomic Energy Agency (IAEA) and the US will be allowed access to Iran to oversee the destruction of the country’s stockpile of highly enriched uranium – a provision that Vance said was expressly included in the memorandum.