Iran Warns of Retaliation over US Scheme to Divert Frozen Assets

Iran has issued an explicit warning to Washington, denouncing as a breach of international law reports that the United States is considering using frozen Iranian assets to compensate its Gulf allies for war-related damages. In a sharply worded statement posted on social media, Deputy Foreign Minister Kazem Gharibabadi described the plan as “another shamelessness from America” and insisted that Tehran would not allow its assets to be treated as “war spoils” or a fund for US partners. “Iran will not leave the aggressors without an answer,” he wrote, vowing that the Islamic Republic would itself demand and obtain reparation for the harm inflicted by Washington and its regional allies.

The row was ignited by a Reuters report that the US Treasury was weighing a mechanism to make Iranian assets available to Gulf states for post-conflict reconstruction and repair of future damage attributed to Iran. Viewed from Washington, such a move would represent a further tightening of the economic stranglehold on Iran, leveraging its own frozen funds to strengthen a regional security architecture aligned against it. The assets in question are part of billions of dollars held outside Iran under US sanctions, long a point of contention between the two adversaries.

From the vantage point of Gulf capitals, however, the proposal carries its own complications. While they stand to benefit materially, Iran’s response—and its assertion that these governments are “not in a position to demand reparations”—lays bare the transactional nature of the arrangement and risks exacerbating regional hostilities. Gharibabadi’s dismissal of their right to claim compensation suggests Tehran views them not as innocent victims but as complicit in Washington’s broader campaign of pressure.

Analysts in European capitals note that the dispute adds yet another layer of friction to an already volatile dynamic. The use of frozen sovereign assets for such purposes sits in a legal grey zone, and any attempt to formalise it would almost certainly be challenged in international tribunals. Moreover, Iran’s warning that it will pursue its own compensation claims signals a readiness to escalate through lawfare and diplomacy, potentially entangling European firms and governments that maintain commercial ties with the Gulf states.

As the standoff unfolds, the fate of these assets appears destined to remain a powerful bargaining chip—or a casus belli by other means. With Tehran continuing to expand its nuclear programme and Washington committed to maximum economic pressure, the latest rhetorical volley underscores how far any path to de-escalation remains. For now, Iran’s message is unambiguous: the funds are not up for negotiation, and any unilateral action will invite a proportionate response.