US President Joe Biden makes remarks
US President Joe Biden makes remarks after speaking by phone with Israeli Prime Minister Benjamin Netanyahu about the situation in Israel following Hamas' deadly attacks, from the State Dining Room at the White House in Washington, on October 10, 2023. Image Credit: AP

US officials and the Qatari government have agreed to stop Iran from accessing a $6 billion account for humanitarian assistance in light of Hamas’s attack on Israel, Deputy Treasury Secretary Wally Adeyemo told House Democrats on Thursday, according to two people who spoke on the condition of anonymity to describe the private remarks.

Coming just a few weeks after the US and Iran announced a deal on the money, the decision not to permit access could have major geopolitical reverberations, with the Biden administration undercutting negotiations with Tehran that took years to finalise. Biden aides had rejected the unfounded accusation that funds not yet released had fuelled the Hamas attack, but they still faced a bipartisan backlash on Capitol Hill aimed at preventing the money from going to Iran.

The move reflects just how rapidly the Hamas massacre in Israel has reshaped US relations in the region. As Israel pummels Gaza in retaliation, the Biden administration has reaffirmed its commitment to its allies, with Secretary of State Antony J. Blinken travelling to Israel in a show of support.

Further punitive measures against Tehran are possible. Treasury Secretary Janet L. Yellen suggested Wednesday that the US is considering additional sanctions on Iran. While there has been no evidence of Iran’s direct role in the attack, US officials say Hamas has received weapons and training from Iran, The Washington Post previously reported.

“The world just changed, and it changed because Iran has built a barbaric terrorist organisation inside Gaza that just raped and murdered hundreds of Israelis,” said Sen. Chris Murphy (D-Conn.), a leading Democrat on the Senate Foreign Relations Committee. Murphy added he has not discussed the matter with administration officials. “I don’t really care what the hard-liners think. They have to understand the entire region is different today.”

Asked about the push to freeze the aid, Iran’s mission to the United Nations responded in a statement: “The money rightfully belongs to the people of Iran, earmarked for the Government of the Islamic Republic of Iran to facilitate the acquisition of all essential and non-sanctioned requisites for the Iranians.”

The deal, financed by Iranian oil sales, allowed Iranian entities - not the Iranian government - to access the funds, and only if they provided extensive documentation showing the money will be used for humanitarian purposes. US officials would have to approve each transaction under the agreement. The money had been transferred to Qatar from banks in South Korea to facilitate the arrangement.

But lawmakers in both parties and former president Donald Trump hammered the agreement in the wake of the massacre by Hamas.

On Saturday, Trump mischaracterised the agreement as he attacked Biden, saying: “This war happened for two reasons: the United States giving Iran $6 billion - how about that deal?” Sen. Tim Scott (R-S.C.), another presidential hopeful, also alleged that “Joe Biden funded these attacks on Israel.”

Numerous Senate Democrats, while refraining from tying the deal to the attack, also called on Biden to rescind the funds. By Wednesday evening, their ranks had grown to more than a half-dozen, including even more liberal lawmakers such as Senate Banking Chair Sherrod Brown (D-Ohio).

“I can’t say I’m surprised that the politics of adhering to the decision were becoming increasingly unfavourable to the administration, and they were wise to cut their losses before their losses increased,” said Bill Galston, a former Clinton economic official now at the Brookings Institution, a D.C.-based think tank, who stressed he had no firsthand knowledge of the decision. “It became unsustainable as a result of the attack.”

The administration has not ruled out, at least publicly, the possibility that the money will become unfrozen at some point.

Adeyemo told House Democrats that the money “isn’t going anywhere anytime soon,” according to three House Democratic aides, who spoke on the condition of anonymity to describe internal conversations. That comment was first reported by Punchbowl.