The Trump administration seems poised to scuttle the Iran nuclear agreement, the Joint Comprehensive Plan of Agreement (JCPOA). If it does, this decision will be a triumph for the deal’s critics, who have aggressively undersold the JCPOA’s achievements in limiting the country’s nuclear program and oversold the economic relief it gave Iran. Indeed, the discrepancy between what critics have said and what actually occurred should be a warning that assumptions circulated in the press about the economic benefits for Iran associated with the deal, and the supposed power that new unilateral U.S. sanctions could have on Iran, may be more political than empirical. American policymakers should ensure that these wrong assumptions do not inform U.S. foreign policy going forward.

JCPOA critics have emphasized that Iran was receiving too much in return for a deal that did not permanently eradicate Iran’s enrichment plans or address the country’s support for terrorism or its missile program. Tehran, critics argued, would benefit upfront from suspending its nuclear program while the sanctioning countries would lose their ability to keep pressuring it for its other infractions. Iran did garner limited international political value from the deal in demonstrating itself reasonable enough to enter into a serious, tightly-monitored, international agreement. But the upfront economic benefits—the so-called “windfall”—from unfreezing certain Iranian assets fell short of expectations while the country’s gains from reintegration into the global financial system have been gradual at best.

Post-Sanctions Relief

Among critics of the JCPOA, the unfreezing of Iranian assets held in overseas banks as a result of the deal gained an exalted status. Much commentary touted $150 billion in cash that Iran could access immediately. Critics speculated about how much Iran would immediately channel toward nefarious activities including ballistic missile procurement and funding of Hezbollah and Shia proxy militias in Iraq and Syria. However, the truth proved more modest. Official U.S. sources gave a range of $100 to $125 billion in frozen assets overseas. Within this range, though, only about $50 billion constituted liquid assets.

Even these lower numbers are too generous. Iran did not immediately gain access to the entirety of the frozen money following the implementation of the JCPOA. Much of that money—nearly $60 billion—was owed to overseas creditors, like China. The remaining approximately $55 billion needs to be put in context. Certainly, funding low-intensity conflict can be inexpensive. But a missile program, funding the Iranian military and its Islamic Revolutionary Guard Corps are not. Iran’s total declared military budget is $14 billion.

Furthermore, military expenditure is just one aspect of Iran’s overall budget picture. Emerging from years of crippling sanctions, the country requires expensive infrastructure and reconstruction needs—an estimated $100 billion per year between 2015 and 2025. Iran also has had no choice but to use its newly accessed funds to defend its currency and manage its trade balance to keep commerce flowing, especially as sanctions-related uncertainty has continued through 2016 into 2017. The official exchange rate has swung sharply—particularly following the election of Donald Trump—and access to finance and inflation are still identified by economic analysts as the two top concerns for the economy going forward.

These nonmilitary expenditures are a necessity. Spending money on rebuilding the economy, defending the currency, and expanding trade, jobs and investment is a fundamental priority for the government. President Hassan Rouhani was elected with a popular mandate to deliver in these areas, and while he appears to be doing so, much remains to be done. Iran saw a 64 percent increase in foreign direct investment (FDI) inflows in 2016. Inflation, which stood at 40 percent when Rouhani took office in 2013, fell to single digits although it has recently inched back up back up to over 10 percent. Labor force participation has also increased under Rouhani—a reason for optimism—although the country’s unemployment rate concurrently reached a three-year high (12.7 percent) during the second quarter of 2016. The $55 billion, plus the $3.37 billion dollars of FDI inflow for 2016, still falls well short of the projected figure of $100 billion a year solely in new infrastructure needed to help jumpstart the Iranian economy. As a whole, these mixed to positive indicators suggest the little leeway Iranian leaders have to focus solely on military expenditures as long as the recovery remains so tenuous.

Iran and Global Banking

The partial return of frozen assets is also only one part of the “windfall” argument. Deal critics—and hopeful Iranians—also expected Tehran to profit greatly from its re-entry into the global financial system. After U.S. and EU sanctions had effectively severed the connection between Iran and the world markets, including the barring of dollar-denominated transactions by revoking the U-Turn transaction loophole in 2008, the benefits from sanctions relief, they hoped, would go a long way to restoring the productivity of the Iranian economy. Instead, remaining sanctions and continued prohibitions on use of the dollar, combined with domestic economic problems, have limited the scope of the relief. These limitations belie the claim that Iran got an immediate and irreversible economic benefit from the U.S. decision to sign the deal.

Iran’s relationship with the Financial Action Task Force (FATF), the global standard setting organization for anti-money laundering and counterterrorist finance, shows how the combination of domestic issues and international pressure has kept the heat on Tehran. The country, two years after the deal, remains on FATF’s “blacklist” along with North Korea, as a result of Iran’s lack of transparency and continued funding of terrorism. While FATF has suspended some draconian measures on Iran (although keeping it on the blacklist), banks are still embracing “wait and see” approach toward reengagement with Tehran, and the blacklisting continues to serve as a strong deterrent against reestablishing links. This gradual FATF process points to the reality of a return to global financial networks that is far slower and more fraught than suggested by deal critics who have focused on a “windfall.”

The numbers bear out the story of Iran’s partial reintegration into the global financial system. In 2006, Iran had correspondent banking relationships with 633 international banks. By 2014, the number had declined to fifty. At the end of 2016, while the trend was positive, there were still only 238. As of March 20, 2017, there were reportedly only about 704 relationships with 249 foreign banks. While an increase, it is still far below what would be expected of a country with the size of Iran’s economy. By way of comparison, Panama, a country whose GDP was almost seven times smaller than Iran’s in 2016, had about 463 correspondent banking relationships between 2015 and 2016. Correspondent banking relationships are key to reintegrating into the global financial system because they facilitate the global transfer of money and provide cross-border services like wire transfers and letters of credit. Even more importantly, none of the relationships Iran had reestablished included large international institutions. Relationships with large institutions are fundamental because they have the large financing capacity necessary to foster trade and investment, rather than offering smaller-scale financing and personal banking services.

The chilling effect on trade of Iran’s partial reengagement with the global financial system is clear. While total trade in goods between the European Union and Iran in 2016 was more than double the amount at its low point in 2013, it was only 55 percent of the average bilateral trade between 2006 and 2011.

Activity in the oil sector has obscured Iran’s sustained poor macroeconomic reality. Production rebounded in 2016 to 3.7 million barrels per day, a 17 percent increase over the 2014 low, but still below 2012 levels. Petroleum exports increased almost 80 percent between 2015 and 2016, although, due to the global decline in oil prices, revenues from exports increased only by 51 percent.

Because of the dynamism in the energy sector, a headline GDP growth figure of 7.4 percent in the first half of 2016–2017 obscured the fact that only 0.9 percent was attributable to non-oil sector activity. The IMF has pinned this lackluster growth outside of the hydrocarbon sector on both structural weaknesses, such as the outsized and intrusive role of the state and excessive red tape, as well as lack of access to finance dictated in part by the absence of large international financial institutions in the Iranian economy.

Individual decisions on whether to reengage with Iran by some of the largest international players point to the difficulties of conducting business with Tehran. In March 2017, the Bank of England did not grant Iranian banks special clearing accounts that could have improved their ability to make and receive payments in pounds. Internationally, large banks have refrained from providing services to Iranian firms out of fear of losing access to the U.S. financial system for inadvertently violating U.S. sanctions linked to Iran’s support of terrorism, human rights violations, and missile program. After all, any upside from offering services to Iranian firms pales next to the downside risks for big financial institutions from being barred from using dollars or participating in the U.S. financial system as a result of violating U.S. sanctions. Large banks have also balked at participating in deals in Iran. Banks are worried about following the law, a concern driven home by the memory of major fines, as well as the continued requirements of deferred prosecution agreements (DPAs). DPAs reached by international banks with U.S. prosecutors impose expensive internal monitoring requirements as punishment for past sanctions infractions, limit banks’ scope of action in certain countries, and contain large penalties for failure to comply.