US Weighs Diverting Iran’s Frozen Assets to Rebuild Gulf States

The United States is pressing ahead with a controversial plan to redirect frozen Iranian assets to fund reconstruction in Persian Gulf allies hit by Iranian missile and drone strikes. Treasury Secretary Scott Bessent has ordered a team to evaluate the cost of damage already inflicted on states such as Kuwait and Bahrain and to prepare a mechanism to access the assets for future repairs, according to officials familiar with the matter. The move, which has not been formally announced, comes amid a sharp escalation: in the past week alone, Kuwait and Bahrain intercepted multiple ballistic missiles launched from Iranian territory.

Viewed from Washington, the initiative is presented as both a deterrent and a form of burden-sharing. The Treasury intends to use “all available authorities” to make the assets accessible, a source told CBS News, while the State Department has framed it as pressing Iran to bear the costs of its “destabilising behaviour”. The assets in question are thought to include billions of dollars in frozen bank accounts, as well as hard assets such as oil tankers seized in sanctions enforcement. Yet legal experts note that such a diversion would require novel interpretations of US law and could face challenges in international courts.

The plan has ignited fury in Tehran, where state-linked media describe it as “confiscation” and a violation of international norms. An adviser to Supreme Leader Ayatollah Mojtaba Khamenei, Mohsen Rezaei, warned this week that any peace agreement depended on the release of $24 billion in Iranian funds frozen abroad — a demand Washington has so far rejected. Iranian news outlets have accused the US of using the reconstruction scheme to derail talks and impose further economic pain. “America is thinking of scooping up Iran’s blocked assets to rebuild Arab countries,” wrote Hamshahri, reflecting a widespread view that the White House is exploiting the conflict to permanently deprive Iran of its reserves.

From Gulf capitals and European chancelleries, the reaction has been guarded. Arab allies, while welcoming material support, fear that diverting assets could prolong the conflict and invite more attacks. European diplomats, who have sought to mediate, worry the US move will complicate fragile ceasefire negotiations that were already foundering over Iran’s insistence on asset release. Analysts in London note that by openly targeting frozen reserves, Washington risks pushing Tehran away from the negotiating table, especially as hardliners in Iran use the issue to rally domestic support.

The plan’s future remains uncertain, but it underscores a broader shift in US policy toward financial warfare. Whether the Treasury can build a legal framework quickly enough to make a difference on the ground is doubtful; the assessment of damage and the approval of asset transfers are likely to take months. More immediately, the initiative appears designed to increase leverage in talks that have been deadlocked for weeks. For Iran, which sees the assets as a lifeline for its sanctions-battered economy, the proposal is an existential threat that could scupper any diplomatic opening. As both sides dig in, the Gulf states — caught between US security guarantees and the reality of Iranian retribution — wait for a resolution that remains elusive.