The X Factor
More OFAC licenses should have a dollar rider
U.S. financial sanctions are sometimes portrayed as the hammer with which we smash our enemies into smithereens. There is much less fanfare around general licenses, which precisely shape sanctions programs, and historically have carved out targeted exceptions from smithereendom for humanitarian aid, medical goods, wind-down periods, official U.S. government business, and limited sector-specific activities such as civil aviation safety or port operations.
However, OFAC’s most recent general license (GL) for Iranian crude — GL X, published June 22 — marks a notable evolution. It authorizes the production, delivery, and sale of Iranian-origin crude oil, petrochemicals, and petroleum products through August 21, 2026. What’s new is that it explicitly permits U.S. dollar-denominated payments directly to the Government of Iran or other blocked person for these transactions. Based on our review of the 355 active and inactive general licenses currently available on OFAC’s site, this is likely the only license that specifically calls out dollar use for large-scale commercial activity to a sanctioned government.
We think this approach can be taken even further.
License to (dollar) bills
OFAC probably added the explicit U.S. dollar payment language in GL X for a couple reasons. First, Scott Bessent confirmed on Wednesday that negotiations with Iran have included discussions about Iran invoicing in U.S. dollars, according to Bloomberg. Second, it serves as a direct signal to international financial institutions that these transactions have Washington’s blessing, reducing the risk of overcompliance — overcompliance is a major issue for U.S. policymakers because financial institutions’ fear of shifting government priorities often strangles activity the U.S. has explicitly authorized through a license.
OFAC has been providing general licenses throughout the Iran crisis in order to provide targeted relief to energy markets, such as the time-bound General Licenses for Russian-origin crude (GL 134). Given the fact that three of our top five most designated jurisdictions are energy exporters, it is reasonable to assume we will go down this road again. If the U.S. is going to continue to lean on general licenses both as a way to provide relief to markets AND as a tool of diplomatic leverage, we should selectively begin including dollar mandates and require that transactions using the licenses are conducted in U.S. dollars.
Why? Countries have spent years building alternative payment systems. Simply permitting activity like oil sales could give sanctioned states and their partners the relief they need to accelerate their shift toward non-dollar payment systems. Recent WSJ reporting on the Iranian government actively evading U.S. sanctions on crude oil with the help of China makes the risk clear. There is also a case to be made that mandating oil sales in USD could route some of the existing sanctioned oil trade in RMB back into USD.
There is a precedent for this shift in policy. In the Venezuela oil-sector general licenses (for example GL 46C, 48B, 50B, and 52A), the U.S. does not simply permit transactions but also mandates the terms. These licenses require that any contract with the Government of Venezuela or PdVSA be governed by U.S. law, with disputes resolved in U.S. courts. They also require that payments to blocked persons (other than local taxes or fees) be deposited into Foreign Government Deposit Funds — U.S.-controlled accounts established under Executive Order 14373. In short, the United States is already dictating both the legal framework and the financial plumbing for permitted activity. Licenses involving the Cuba program contain similar, though narrower, provisions allowing certain dollar-clearing transactions. However, most of the other general licenses we reviewed contain no such conditions.
GL X therefore stands out as one of the clearest examples of a small but growing group of licenses that move beyond passive permission and into active control.
Hello Tehran
There is a great scene in Wayne’s World 2 where Ozzy Osbourne’s former roadie tells Wayne and Garth that Ozzy refused to perform unless he had one thousand brown M&Ms.
“So there I am, in Sri Lanka, formerly Ceylon, at about 3 o’clock in the morning, looking for one thousand brown M&Ms to fill a brandy glass, or Ozzy wouldn’t go on stage that night.”
If Ozzy Osbourne can demand 1,000 brown M&Ms, then the United States — the rock star of global markets — can mandate that any transaction temporarily permitted under a general license be conducted in U.S. dollars and routed through the U.S. financial and legal system.
The era of purely permissive licenses is ending. If the U.S. government is going to use licenses as short-term leverage, we should shape the conditions of access. The dollar rider in GL X could be part of the future of American financial power.