Iranian regime likely to rebuild military with funds released by MoU, ISW assesses

What Happened

The Institute for the Study of War (ISW) assessed on Tuesday that economic relief reportedly included in a pending US–Iran Memorandum of Understanding (MoU) would immediately allow the Iranian regime to reconstitute its military, particularly missile and drone programs. ISW cited earlier statements by Iranian Foreign Ministry Spokesperson Esmail Baghaei, who said in May that ‘we spend part of Iran’s money on missiles and drones,’ and noted that IRGC Commander Major General Ahmad Vahidi has insisted that any released frozen assets be allocated to military spending. Unconfirmed media reports describe the MoU as including US lifting of port blockades and immediate waivers on Iranian oil sanctions upon signing; the semi-official Mehr News Agency estimated Iran could generate up to $10 billion from 60 days of oil exports. US President Donald Trump denied a specific $300 billion fund but called the deal ‘fair,’ and Vice President JD Vance said the MoU text will be released by Saturday. ISW’s assessment aligns with concerns raised earlier by Israeli experts.

Key Actors

Why It Matters

The reported MoU would inject significant resources into Iran’s economy, directly enabling the expansion of its missile and drone arsenals, strengthening the ‘Axis of Resistance’ and heightening threats to Israel and regional stability. It marks a potential reversal of the US ‘maximum pressure’ sanctions architecture just as Iran faces internal and external pressures, and raises questions about the IAEA monitoring framework and the broader nuclear backchannel.

Watch For

Vice President Vance said the MoU text will be released by Saturday; its publication will clarify the scale of sanctions relief and any restrictions on funds. Monitor for immediate oil export resumption, IRGC budget announcements, and Israeli/Gulf state reactions. IAEA board meetings and the Oman-mediated nuclear talks may be affected by the deal’s final terms.