US energy secretary says Hormuz oil flows averaging nearly 13 million barrels a day

Trump publicly rejected the proposal on Saturday. The plan would have reopened the strait within seven days and resumed nuclear negotiations in return for measures including lifting the US naval blockade of Iranian ports.

The president plainly wants normal shipping restored, but he appears unwilling to pay the price Tehran is asking for it.

Iranian officials have repeatedly described Hormuz as a strategic asset and a source of leverage. Disruption of the narrow waterway affects energy markets, shipping costs and inflation far beyond the region.

That importance has not disappeared. What may be changing is Iran’s ability to convert that disruption into immediate political concessions from Washington.

The US military has spent months trying to reduce Iran’s ability to attack shipping while expanding escorts for commercial vessels. CENTCOM commander Adm. Brad Cooper said last week that US forces had facilitated the transit of more than 2,000 commercial vessels and more than one billion barrels of crude oil through the strait.

The operation has not restored normal shipping, but it has allowed substantial volumes of oil to move without an agreement with Tehran, helping Washington turn Hormuz from an Iranian energy veto into what it increasingly appears to regard as a manageable risk.

Why Trump can wait

If Washington believes it can keep significant quantities of oil moving without Tehran’s cooperation, there is less incentive to lift the naval blockade and ease economic pressure simply to secure the full reopening of the strait.

Trump’s rejection also comes as his administration is increasing rather than reducing that pressure. At the UN General Assembly this week, he called for Iran’s “complete economic isolation” and said he expected an agreement after the November midterm elections

The administration has expanded restrictions on Iranian banking and aviation. Iranian airlines have lost access to several international destinations, while companies servicing sanctioned Iranian carriers face the threat of secondary US sanctions.

Trump’s rejection therefore suggests Washington believes time is, for now, working more in its favor than Tehran’s.

Hormuz still matters

None of this means Iran’s Hormuz strategy has failed.

Keeping commercial traffic moving requires a major US military operation, while shipping and insurance costs remain elevated and the threat of attacks has not disappeared. Washington is paying a price for managing the disruption.

But the balance may have shifted. Tehran still views reopening Hormuz as something it can exchange for relief from economic and military pressure. Washington appears to believe it has reduced the costs of disruption enough that it does not yet need to meet Iran’s asking price.

Seen that way, Trump’s “no” becomes more significant. He has not necessarily rejected diplomacy: contacts through mediators continue, and Iran says it is still awaiting Washington’s formal response to its proposal. US officials have also described indirect discussions as continuing.

What Trump has rejected, for now, is Tehran’s price for ending the Hormuz crisis.

Iran still holds the Hormuz card. Washington’s calculation appears to be that it no longer has to pay as much to take it off the table.

Iranian Foreign Minister Abbas Araghchi said Sunday that Tehran had seen an initial reaction from Trump but was still waiting for Washington’s formal response through mediators before deciding its next step.

“Only a negotiated solution can get them out of this deadlock. That is our position,” Araghchi said, according to Iranian state media. He reiterated that reopening the Strait of Hormuz depended on Iran’s conditions being met.

Trump said Saturday that he had rejected Iran’s proposal, which envisaged a phased process involving relief from the US blockade and economic pressure and the reopening of Hormuz.

The exchange leaves diplomacy in an unusual position: Washington says the Iranian offer is unacceptable, while Tehran says it is still awaiting a formal answer through the diplomatic channel.

The proposal emerged from contacts around the UN General Assembly in New York, where Trump called for Iran’s “complete economic isolation” while saying he expected an agreement after the November 3 US midterm elections.

Iranian President Masoud Pezeshkian has said Tehran would prefer an agreement before the vote. But Pezeshkian has also stressed how little trust remains between the two sides.

“We have talked with them four or five times already,” he told Al Jazeera. “We no longer trust these talks, because however much we negotiate, after a while they start attacking, imposing sanctions and doing the things they have done so far.”

US Treasury Secretary Scott Bessent said Sunday that Turkey and Oman had stopped Mahan Air flights, the UAE had halted flights by Iranian airlines and major banks in Turkey and the UAE had stopped transactions with Iran following US pressure.

Bessent thanked the governments of Turkey, Oman, the UAE and the UK for their cooperation, saying the campaign was “delivering results.” The measures further restrict Iran’s access to regional aviation and banking networks as the rial trades at record lows.

China, meanwhile, has sought to keep diplomacy alive. President Xi Jinping told Trump last week that Beijing supported a return to the June Islamabad agreement aimed at ending the war and reopening Hormuz.

For now, the central dispute remains one of sequencing. Iran wants relief from the US blockade and economic pressure before relinquishing its leverage over Hormuz. Washington wants the waterway reopened on acceptable terms before offering Tehran the relief it seeks.

Iran’s Trade Promotion Organization said the change applies to goods brought in by border carriers, seafarers and border cooperatives, while imports of major appliances through normal commercial channels remain prohibited.

The clarification came after Iranian media initially reported a broader lifting of restrictions on Samsung and LG.

Rather than reopening commercial imports, the measure expands a narrow exception tied specifically to Iran’s border economy.

It allows more trade and income to flow through border areas without formally abandoning a policy associated directly with Khamenei and the state’s longstanding protection of domestic manufacturers.

Destitute and discontent

Poverty and scarce employment have pushed even children and teenagers in western border regions into kolbari, the hazardous practice of carrying goods on one’s back across the border.

Allowing more goods through cooperatives and border traders could therefore provide a limited economic pressure valve.

Officials have not described the measure as an attempt to reduce discontent, but the decision to channel the exception through mechanisms designed around border employment gives it a distinct geographic focus.

Economic deprivation in Iran’s border regions also overlaps with longstanding political and security tensions. Kurdish-majority areas along the Iraqi border, where kolbari is widespread, have repeatedly seen deadly crackdowns and armed confrontations with security forces.

Protectionism

The move also comes as the industry the ban was designed to protect is itself struggling. Five years later, the objectives of the protectionist policy remain elusive.

Refrigerator production has fallen 25% year-on-year, television production 36% and washing-machine output 42%, according to the Statistical Center of Iran.

Home-appliance prices in August were 117% higher than a year earlier, while Iranian producers still import roughly $1.2 billion of components annually for four major appliance categories.

Protection has also reduced consumer choice, with the burden falling unevenly. Foreign appliances have continued to reach more affluent Iranians through unofficial channels, while lower-income consumers have fewer alternatives.

With Samsung and LG outside the normal import network, access to authorized sales, spare parts and after-sales service has also become more difficult.

Who bears the cost?

The pattern resembles Iran’s automobile industry, where imports were banned or severely restricted for years while domestic producers were shielded from foreign competition.

Khamenei himself acknowledged in 2022 that domestic car quality was poor and that public complaints were justified. Subsequent attempts to reopen imports have remained tightly controlled.

Here too, the burden has been uneven. Lower-income consumers have fewer alternatives, while wealthier Iranians have greater ability to obtain imported and luxury vehicles through more expensive channels.

The result is a recurring pattern in Iran’s protected industries. Import restrictions create scarcity and opportunities for intermediaries while imposing the greatest costs on consumers with the fewest resources.

The latest appliance measure loosens one part of that system without dismantling it: a narrow opening at the borders, while the protectionist structure that produced many of the distortions remains intact.

Iran’s oil industry is more than a collection of wells, pipelines and refineries. What turns those assets into an industry is an integrated chain of reservoir expertise, production planning, engineering, safety, financing, sales and accountability.

That chain has been badly fragmented. In the past two decades, especially under President Mahmoud Ahmadinejad, projects have been handed to military institutions, shares and assets transferred to pension funds and quasi-state bodies, and even oil cargoes used to cover budget shortfalls in organizations outside the Oil Ministry.

Unless a future Iran addresses that fragmentation, billions of dollars in investment and the most advanced technology could simply reproduce the old disorder on a larger scale.

From privatization to quasi-state ownership

The Ahmadinejad government accelerated the sale of state assets in the name of privatization, but much of the process did not produce an independent private sector.

Academic Kevan Harris has described the process as a form of pseudo-privatization: assets and privileges moved from one part of the state to pension funds, foundations, affiliated companies and military institutions without producing genuinely competitive markets, transparent ownership or public accountability.

In oil and gas, the Oil Ministry and its subsidiaries lost some of their practical authority over contractors, projects, procurement and, at times, the sale of oil.

One of the starkest examples was the decision to give oil cargoes to Iran’s police force to sell. Esmail Ahmadi-Moghaddam, then commander of Iran’s police, acknowledged in 2014 that during Ahmadinejad’s presidency the force had been given two oil cargoes to sell, with some of the proceeds intended to cover a salary shortfall.

The budgets of the police, ministries or pension funds should be recorded in the state budget and paid through the treasury, not financed by giving individual institutions a company, refinery, oilfield or oil cargo. Such arrangements erase the boundaries between owner, policymaker, client, contractor and seller.

Khatam al-Anbiya: one name, a network of interests

Khatam al-Anbiya Construction Headquarters is the economic and engineering arm of the Islamic Revolutionary Guard Corps, but it should not be understood as a conventional, integrated company.

It serves as an umbrella over numerous holdings, affiliated companies and subcontractors. Reuters reported in 2015 on the extensive network of companies linked to the IRGC and the difficulty of identifying their ultimate owners. A “contract with Khatam,” therefore, did not necessarily mean a clear chain of command, auditing and responsibility.

Under Ahmadinejad, the network received major contracts without effective competition. In 2011, Reuters reported that two pipeline contracts, each worth $1.3 billion, had been awarded to Khatam. Development of phases 15 and 16 of the South Pars gas field had also been awarded to the organization.

The result was multiple centers of power, allowing projects to be divided among different entities and responsibility to become diluted along the chain.

The consequences were technical as well as financial. Oil production requires reservoir engineers, drilling specialists, safety personnel and procurement departments to work under common standards and a coherent system.

Fragmenting projects among institutions with different missions and unclear accountability also fragments expertise and decision-making.

‘One sheikh in Bahrain, forty sheikhs in Iran’

I saw something of this problem during my own time working for Shell in the Netherlands.

I once asked the Dutch manager responsible for Iran why Shell had ended its activities in the country. I remember the essence of his answer like this: “We went to Bahrain because there we dealt with one sheikh; in Iran, we had to deal with forty sheikhs.”

Khatam might formally be the contracting party on a project, he explained, but another unit within the same network could then say it was responsible for security along part of the pipeline and demand a separate payment.

His point, as I understood it, was that instead of one accountable client, a foreign company could find itself dealing with multiple centers making separate demands for payment.

This is my recollection of an unrecorded conversation, not documentary evidence explaining Shell’s departure from Iran. The public record points principally to sanctions and political pressure: Reuters reported in 2008 that Shell withdrew from a planned Iranian gas project amid US pressure.

But sanctions and domestic disorder are not mutually exclusive explanations. Sanctions raised the cost of entering Iran; multiple centers of power raised the cost of staying.

The conversation illustrated the problem: when the contractual counterparty is known but the number of parties making demands is not, neither the true cost of a project nor responsibility for it can easily be calculated.

The Baku lesson

Another experience may offer a useful lesson for Iran’s future.

While working for BP, I travelled to Baku on a short assignment concerning contractor-selection models. An Azerbaijani colleague described how the country had used foreign partnerships after the collapse of the Soviet Union to modernize technology and develop its domestic workforce.

Azerbaijan did not hand its oil industry to BP. Under a production-sharing agreement signed in 1994, BP became operator of the Azeri, Chirag and deepwater Gunashli fields, while Azerbaijan’s state oil company SOCAR remained the principal domestic partner.

More important for Iran was the emphasis on local capacity. Training technicians, developing local suppliers and progressively replacing foreign personnel with Azerbaijani workers became part of the project. BP says it now directly employs around 2,380 Azerbaijani citizens, while Azerbaijanis have made up around 90% of its professional workforce in the country.

The lesson is not that Iran should hand management of its oil industry to BP. It is that an international operator can be selected for a particular project, targets set for training and localization, and domestic personnel left with greater technological knowledge and experience.

An architecture for Iran’s oil industry

Rebuilding Iran’s oil industry should begin with rebuilding its institutions, not redistributing the spoils.

Oil and gas should remain public assets. Parliament should establish the legal and financial framework, the government determine energy policy, and an independent professional regulator oversee licensing, safety, reservoir protection and environmental standards.

The referee must also be separated from the player. The National Iranian Oil Company should operate as a commercial and technical enterprise rather than simultaneously acting as regulator, client, partner, supervisor and arbiter of disputes.

Military and non-specialist institutions should gradually be removed from the industry. The process should be legal, audited and phased so existing projects are not abandoned.

Specific fields, refineries and infrastructure projects could instead be offered through transparent international tenders. Foreign companies could compete to operate or participate in individual projects, but no company or country should acquire a monopoly over the industry.

Contracts should be time-limited and contain measurable requirements for costs, production, environmental standards, Iranian employment and technology transfer, with extensions dependent on independent assessments rather than political connections.

Contracts, ownership, payments, costs, production and project revenues should generally be public, with auditing independent of the Oil Ministry, NIOC and contractors.

Contracts, ownership, payments, costs, production and project revenues should generally be public, with auditing independent of the Oil Ministry, NIOC and contractors.

Iran will also have to reassemble its human capital. Specialists inside the country, Iranian oil professionals abroad and a younger generation of engineers should be connected through a national program of training and succession. Foreign contractors should be required to build Iranian counterpart teams, not foreign islands inside the industry.

Rebuilding trust

Iran will need foreign investment and technology to restore production and modernize its refineries. But the need for capital should not be confused with surrendering sovereignty.

A homeowner can hire international architects and contractors without handing them ownership of the house. A future Iranian government can similarly benefit from competition among foreign companies while keeping ownership of resources, policymaking and ultimate authority in Iranian hands.

Iran’s oil can become a national asset again only when every contract has an accountable party, every project an auditable account and every decision a clearly defined legal authority.

The answer to the problem of “forty sheikhs” is not to create a new sheikh, Iranian or foreign. It is to build a single, transparent and professional system in which no commander, foundation, ministry or foreign company stands above the law.

Ortagus pointed to Trump’s first term, when Democrats took control of the House in the 2018 midterms but his administration continued its “maximum pressure” campaign against Tehran and ordered the 2020 killing of Qasem Soleimani.

“Any fallacy that they have that President Trump is going to limit his decision-making authority… based off a change in the Congress is a miscalculation by a regime who still fundamentally does not understand this president.”

Congressional debate over war powers was “healthy for our democracy,” Ortagus said, but did not change the president’s authority “to take any action against Iran that he deems necessary for the safety and the security of the American people.”

Ortagus, who held senior roles in both Trump administrations, said the United States has been in a conflict with the Islamic Republic “not for seven months, but for 47 years,” and argued that economic pressure alone would not have prevented the current military confrontation.

She described Trump’s first-term maximum pressure campaign as “incredibly effective,” but said it was interrupted during Joe Biden’s presidency and has amounted to less than four years in total.

“Sanctions are not a silver bullet,” she said. “Sanctions are a tactic. They’re a way in which you pursue a larger strategy.”

That strategy, she said, should prevent Iran from obtaining a nuclear weapon, cut funding to its proxy groups and stop Tehran from becoming “the next North Korea,” with missiles capable of threatening US bases, regional states and the American homeland.

Ortagus said Trump ordered military action beginning in June last year because Iran was “intransigent” in negotiations and “weeks away from getting a nuclear weapon.” The president had given Tehran a deadline, she said, and Iranian leaders may have believed he was bluffing.

“They learned pretty quickly that he wasn’t.”

Asked whether the campaign would have happened without a closely aligned Israeli government, Ortagus said it would have. Israeli operations had “complemented” US action, she said, but “these have been American decisions and American decisions alone.”

She cited Trump’s decision to order the killing of Soleimani in 2020 as an example of an action he took “by himself.”

On diplomacy, Ortagus said Trump had “always… extended the hand of diplomacy” during both administrations.

“It’s the regime that keeps rejecting that hand.”

She was skeptical that an agreement signed with Iranian officials in New York would hold if the real decision-makers remained in Tehran, echoing Secretary of State Marco Rubio’s doubts about the authority of Iran’s UN delegation.

100%

“What you have to do is to make the thugs in the IRGC understand that everything, their livelihoods, everything that they possess, is going to be put at risk,” Ortagus said.

Trust was not the issue, she added. The question was what mechanisms Washington would establish “so they know… if you backtrack on this, there actually will be a consequence.”

She said she did not see how any future arrangement could work “without some sort of American verification process.”

Hezbollah and Lebanon

Ortagus rejected the argument that Hezbollah should be accepted as part of Lebanon’s social and political fabric.

“Bullshit,” she said.

She said the group was led by the Islamic Revolutionary Guard Corps, had been “indoctrinated, trained, equipped and brainwashed” by Tehran and had dragged Lebanon into “perpetual war,” with Shia communities among the main victims.

President Joseph Aoun and Prime Minister Nawaf Salam had been “very clear,” she said, that Hezbollah must be disarmed and that Lebanon cannot have “a parallel state within a state.”

Dismantling that structure would take time, Ortagus added.

“It wasn’t created overnight, and it won’t be expunged overnight.”

Ortagus said the Abraham Accords had endured the turmoil since October 7, pointing to a meeting of Accords countries on the sidelines of the UN General Assembly this week.

By contrast, she said a Mecca-centered regional alignment “looks pretty weak right now,” after Houthi attacks on Saudi Arabia, including toward holy sites, drew no meaningful response from its signatories.

“Anybody who does that and says they speak in the name of Islam are the worst hypocrites imaginable,” she said.

She declined to discuss current private exchanges between Riyadh and Washington but warned against seeking security through accommodation with Tehran.

“Pacifying this regime is not going to protect you in the long run,” she said. “It will buy you time. It might be a temporary salve, but it won’t heal the wound.”

Ortagus also described the current blockade of Iran as a harder form of enforcement than previous sanctions.

“Nothing’s coming in, and nothing’s going out.”

Asked about the broader US endgame, she listed four goals: preventing Iran from obtaining a nuclear weapon; curbing its ballistic missiles, drones and conventional arms; cutting funding to proxy groups; and supporting the Iranian people.

A final conversation about Iran

Ortagus closed the interview by recounting an unpublished story about the late Senator Lindsey Graham.

In January, she said, she had “Make Iran Great Again” hats overnighted to Graham at Mar-a-Lago so he could give one to Trump on the golf course.

She said she spoke to Graham an hour or two before his death, and that their last conversation was about Iran.

“He never stopped believing in the people of Iran,” she said.