The Memorandum of Understanding (MoU) signed by the United States and Iran earlier this month is the clearest sign yet that the Trump administration felt it needed an off ramp for the war it launched alongside Israel in late February. From the ambitious aims articulated at the start of the war – end Iran’s nuclear program, destroy its missile program and navy, change its leadership, and improve regional stability – the United States has settled for a set of terms that provide Iran with an economic windfall while demanding little in return.

The MoU ends the war and promises to reopen the Strait of Hormuz to maritime traffic – though traffic has yet to return to normal and dropped again following attacks over the weekend. It also contains limited and delayed concessions by Iran on its nuclear program. On all other issues, it is either silent or vague, while the economic benefits it grants to Iran threaten to undo what progress the United States made toward its objectives during the period of high-intensity combat.

The Nuclear Element

Paragraph 8 of the MoU “reaffirms” Iran’s commitment not to procure or develop nuclear weapons. Iran has made such commitments before, both as a non-nuclear weapon state signatory to the nuclear Nonproliferation Treaty and, more recently, as a part of the Joint Comprehensive Plan of Action (JCPOA) concluded with the United States and five other world powers in 2015. Therefore, this commitment is hardly a concession by Iran.

If Iran and the United States reach a final agreement following an extendable 60-day negotiating period, Iran’s stockpile of enriched uranium will be disposed of “pursuant to a mechanism that will be mutually agreed upon […] with the minimum methodology to be down blended on site under the supervision of the IAEA.” That would extend Iran’s timeline to produce weapon-grade material, but it is a limited concession. The “on site” provision indicates that Iran is not required to export the highly enriched uranium – enough to fuel 10-15 nuclear weapons with further enrichment – currently entombed at nuclear sites in order to receive the economic benefits outlined in the MoU. Moreover, down blending of its nuclear material does not necessarily mean that Iran’s stockpile of enriched uranium will be zero at the end of the process; Iran could potentially retain large quantities of uranium that is enriched to a lower level, such as 5%, which would still significantly reduce the time and exposure of a nuclear breakout compared to if Iran started with natural uranium.

Yet, despite the limited nature of Iran’s nuclear concession, the minimum commitment required of the United States as part of a final agreement is “to terminate all types of sanctions against the Islamic Republic of Iran” – an undertaking that would bring the United States’ primary source of pressure against Iran to zero.

The fate of Iran’s uranium enrichment efforts – long the sticking point to any formal end to the nuclear weapon threat – is left to the future. Thus, under a final agreement, Iran may be allowed to resume uranium enrichment work. In fact, the MoU recognizes “Iran’s nuclear needs” as informing the scope of that work. This is a direct concession to Tehran’s long-standing argument that it has “the right to enrich” as part of an expansive nuclear energy program for which, as has been the position of several U.S. administrations, Iran has no plausible civilian need.

Until a final agreement is reached, paragraph 9 of the MoU states that Iran and the United States will “maintain the status quo”:  Iran will not resume nuclear work and the United States “will not impose any new sanctions and will not deploy additional forces in the region.” The U.S. sanctions architecture against Iran is vast and includes broad financial penalties and trade restrictions targeting not only the nuclear program, but also the missile and military programs, human rights abuses, and support for terrorism.

Iran appears to have won an immediate reprieve on any new sanctions, while only being required to maintain the status quo on its nuclear program, which has shown little activity regardless since Israeli and U.S. strikes damaged its key facilities in June of last year. The maintenance of Iran’s nuclear status quo until a final agreement is struck stands in contrast to the preliminary arrangement that preceded the JCPOA, which required Iran to immediately down blend half of its 20% enriched uranium stockpile to 5% purity. In this case, if the MoU falls apart before a final agreement is reached, it will have failed to do anything about the key component of Iran’s nuclear weapon capability.

Sanctions Relief and Iran’s Missile and Drone Arsenal

Iran’s nuclear program – as well as its missile and drone efforts – may also receive a financial boost in light of terms outlined in paragraphs 10 and 11 of the MoU. Paragraph 10 allows Iran to export “crude oil, petroleum products and derivatives, and associated services” under a sanctions waiver issued by the U.S. Treasury Department on June 22. The waiver authorizes dollar payments to be made for such transactions, even to sanctioned parties. Paragraph 11 makes currently frozen or restricted funds – estimated in the tens of billions of U.S. dollars – available to Iran upon implementation of the MoU. Such funds may be used to pay “any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran,” with the United States issuing all necessary licenses and authorizations.

Thus, for the first time since 2018, Iran will be able to export oil licitly and get paid for it in U.S. dollars, thereby replenishing its depleted foreign currency reserves. And Iran will further be able to use funds that had been frozen in overseas accounts to pay any entity in Iran, including, presumably, missile and drone producers on the Treasury Department’s blacklist.

The reduction of Iran’s missile and drone arsenals and production facilities – the war’s main accomplishment – is therefore put in jeopardy by the MoU. Greatly increased revenue and reduced obstacles to spending it will help Iran to rebuild its production capacity and to import from China and elsewhere the goods it needs to replenish its stocks. Iran appeared to have rearmed faster than expected between the June 2025 war and the start of the most recent one; while the damage it has to repair is more extensive in this case, the economic resources it has available will also be much greater. Nothing in the MoU commits Iran to setting any limit on the number or capabilities of its drones and missiles as part of a final agreement, so once Tehran has rebuilt what it lost, it will be free to enlarge its arsenal further.

The Strait of Hormuz and U.S. Leverage

The MoU’s only immediate benefit to the United States is the reopening of the Strait of Hormuz, but even that may be illusory. Paragraph 5 of the MoU leaves open the prospect of Iran exercising control of traffic through the Strait after 60 days, following dialogue with Oman “to define the future administration and maritime services.” Iran appears intent on achieving such an outcome. To that apparent end, it targeted ships over the weekend that were using a route near Oman’s coastline that bypasses Iranian territorial waters.

Meanwhile, by ending its naval blockade of Iranian ports and withdrawing its built-up naval force from the vicinity of Iran, as the MoU requires, Washington will surrender its immediate sources of leverage and deterrence vis-à-vis Tehran. It would need to summon considerable political will to restore those levers in the event of sustained Iranian noncompliance. In the meantime, Iran will likely be hard at work on its weapons programs.

This lopsided MoU may never yield a final agreement, but its immediate effect is to provide Iran with cash and financial flexibility to prioritize missile and drone reconstitution. It also alleviates some of the domestic economic pressure that had prompted recent protests, all while making no immediate demands related to Iran’s nuclear stockpile. For the United States, unless there is a final agreement that far exceeds the limited concessions Iran has promised, the MoU brings little more than an ongoing struggle to compel Tehran to keep the Strait of Hormuz fully open and free of tolls.