U.S. Iran Deal Leaves Nuclear Program, Missile Arsenal, Proxy Network Untouched

The June 17 memorandum of understanding between the United States and Iran leaves intact nearly every element the administration identified as requiring dismantlement when it launched Operation Epic Fury. Iran’s nuclear program is deferred, not dismantled. Its ballistic missile arsenal receives no mention. Its proxy network is actively protected through the inclusion of Lebanon in ceasefire terms.

The regime Washington sought to disarm emerges from the conflict diplomatically engaged, positioned to receive hundreds of billions of dollars in reconstruction capital, and scheduled to benefit from sanctions relief. An Iranian institutional claim over the Strait of Hormuz remains untouched. The sanctions architecture that constrained Iranian power projection is slated for dissolution. A reconstruction fund whose costs will fall on regional partners is written directly into the agreement’s text.

The scale of Iranian strikes on Gulf states illustrates what the MOU fails to address. Iran launched more than 4,000 projectiles against the six member states of the Gulf Cooperation Council in the weeks following the February 28 strikes. Missiles or their debris struck landmark buildings and airports in Dubai, high-rises in Manama, and Kuwait’s international airport. QatarEnergy halted liquefied natural gas production and declared force majeure after Iran struck Ras Laffan, one of the world’s largest LNG facilities. Kuwait and Bahrain cut back oil production due to storage capacity constraints and limited export routes. The UAE’s air defenses engaged 537 ballistic missiles, 2,256 drones, and 26 cruise missiles, killing 13 people, injuring more than 200, and inflicting industrial damage estimated to require a year to repair.

The reconstruction fund presents an immediate operational problem. The MOU commits the United States to work with regional partners to develop a plan with at least 300 billion dollars for the reconstruction and economic development of Iran. Vice President JD Vance told CBS that the fund would be backed by Gulf states if Iran complies. President Donald Trump, before the deal was announced, denied the United States was going to pay Iran, calling it “fake news.” Secretary Rubio, asked upon arrival in Abu Dhabi whether he would be requesting Gulf financial contributions, said “No, that’s far down the road,” and added: “It won’t be our investment. It won’t be our government money.”

The fund is in the MOU’s text. The United States has disclaimed responsibility for financing it. No alternative source of 300 billion dollars exists in the region other than the GCC states whose infrastructure Iran spent four months destroying.

Saudi Foreign Minister Prince Faisal bin Farhan told the European Council on Foreign Relations in Vienna that he had “no details on this fund” and “no information or insight into the concept behind it.” He placed a precondition in front of any economic engagement with Tehran: “We’re going to have to have a conversation on how we rebuild that trust, how we rebuild that relationship before any concept of economic cooperation, mutual investment, or anything like that can rationally be addressed.” He further noted that Saudi investment commitments “have already committed their funding streams to areas that are targeted at our domestic economy.” The message was plain: the Kingdom is not willing to pay.

The United Arab Emirates, which bore more than half of all Iranian projectiles targeting Gulf states and whose foreign minister declared in March that the UAE would not be “blackmailed by terrorists,” has since moved toward pragmatic accommodation. That shift reflects not a softening of its threat assessment, but a hardening of its judgment about the limits of American protection. Abu Dhabi initially demanded Iranian reparations for the damage inflicted on Emirati infrastructure. It then reportedly agreed to release between 10 billion and 20 billion dollars in frozen Iranian funds, with upwards of 3 billion dollars already transferred to Iranian channels, in exchange for a halt to attacks. The UAE issued a categorical denial of these reports. Whether or not the specific figures are accurate, the behavioral pattern is clear: the UAE joined the regional consensus in favor of the deal by June, having concluded that the American security guarantee is conditional, revocable, and ultimately subordinate to Washington’s domestic economic imperatives.

Secretary of State Marco Rubio’s three-nation tour of the United Arab Emirates, Kuwait, and Bahrain this week, undertaken to reassure Gulf allies whose skepticism he acknowledged, is itself evidence that damage is already underway.

According to some reports, the GCC states themselves facilitated and supported the ceasefire deal, having concluded that the cost of continued hostilities exceeded what their economies and populations could absorb. But whether the Gulf states are resisting the MOU’s financial terms or quietly accepting them as preferable to renewed war, the underlying calculus is the same: the American security framework failed to protect them from the consequences of a war they did not seek, and the costs of that failure are being transferred to them regardless of the form the transfer takes. When President Trump acknowledged at a press conference that he signed the MOU because he “didn’t want to see an economic catastrophe,” the Gulf states heard exactly what they feared: that the threshold at which the United States would seek accommodation with Iran was lower than the threshold at which the Gulf states would be made whole.

The sanctions regime presents a second structural vulnerability. The MOU envisions the wholesale dismantlement of a sanctions architecture constructed over more than four decades, beginning with the 1979 revolution and encompassing designations related to terrorism, missile proliferation, human rights abuses, and the Islamic Revolutionary Guard Corps’ status as a foreign terrorist organization. Saudi Arabia’s own accommodation with Iran, culminating in the Beijing-brokered rapprochement of 2023, and the financial channels that the UAE and Qatar maintained with Iranian counterparts throughout the sanctions period, suggest that Gulf capitals never treated the sanctions architecture as an absolute barrier. They valued it as a systematic constraint on Iranian power projection that limited Iranian access to the formal financial system, restricted arms procurement, complicated the financing of proxy networks, and signaled American resolve to contain Iranian expansionism, even as they selectively worked around it when their own interests required.

The promise of its complete removal, absent any Iranian commitment to dismantle proxy networks or curtail its ballistic missile program, communicates to Gulf governments that even the imperfect constraint they relied upon is being traded away in exchange for the reopening of a waterway that Iran closed in the first place. Regional analysts have warned that the release of frozen Iranian funds and the lifting of sanctions could “empower Tehran’s regional networks of militias and proxies, reinforcing the very threats the MOU was meant to contain.”

The Strait of Hormuz presents the most immediate illustration of this threat. The MOU provides for the toll-free reopening of the strait but does not require the dissolution of the Persian Gulf Strait Authority, the formal regulatory body established by the IRGC in May 2026, that requires vessels to submit ownership, insurance, crew, and cargo information and receive a permit before transiting. The PGSA continues to register ships for passage even during the toll-free period, consolidating its institutional presence while the ceasefire nominally suspends its revenue function.

By contrast, the future governance of the strait is being negotiated on a track that excludes most of the Gulf states whose economies depend on it. Iran’s Parliament Speaker Mohammad Bagher Qalibaf and Foreign Minister Abbas Araghchi traveled to Oman this week to discuss “new arrangements to manage” the strait bilaterally. Qatar’s Prime Minister separately visited Muscat for talks with Oman on initiating negotiations involving Iran, Iraq, and Gulf states on Hormuz, discussions explicitly separate from the U.S.-Iran peace talks. The Council on Foreign Relations has noted that Oman may benefit from joining Iran in collecting a toll, creating a bilateral Iranian-Omani governance structure over a waterway on which Saudi Arabia, Kuwait, Bahrain, and Qatar depend for their economic survival.

When Saudi Foreign Minister Prince Faisal was asked about the new arrangements at Hormuz, he rejected the premise outright: “The management of the strait was working fine before the conflict. There were no issues. Ships were navigating freely. Why should we now, as a result of a conflict, accept some novel arrangement that is going to be imposed on it?” Secretary Rubio reaffirmed that “no country is allowed to charge tolls or fees on an international waterway” under existing international law. The declaratory position is clear. The institutional reality on the ground is moving in the opposite direction.

If the PGSA’s permitting infrastructure survives the 60-day negotiating period, Iran will have acquired through the war a permanent lever of economic coercion over every major Gulf energy exporter whose access to global markets runs through Hormuz. Whether the MOU’s framework proves durable enough to prevent that outcome remains the central operational question the agreement leaves unanswered.