With Trump’s praise, Qatar could be set for bigger role in Iran-US standoff

“They have a proposal. More importantly, they know they have to move quickly or something bad—something bad's going to happen,” Trump told reporters aboard Air Force One after leaving the United Arab Emirates.

Axios reported Thursday that the written proposal was delivered during the fourth round of indirect talks between US and Iranian officials last Sunday in Muscat, Oman. It was the first formal offer made by the Trump administration since negotiations began in April, Axios cited US and diplomatic sources saying.

The document, handed over by White House envoy Steve Witkoff, outlines terms for a civilian nuclear program, with specific provisions for international monitoring and verification.

Iranian Foreign Minister Abbas Araghchi reportedly took the proposal back to Tehran for review by Supreme Leader Ali Khamenei, President Masoud Pezeshkian, and other senior officials.

Witkoff described the proposal as “elegant” and “very big” in a recent briefing to the United Nations Security Council, according to Axios, but acknowledged that more work was needed. A fifth round of talks has not yet been scheduled.

Iran has responded positively in public statements. Ali Shamkhani, a senior adviser to Khamenei told NBC News that Tehran is ready to stop enriching uranium to weapons-grade levels, reduce its stockpiles and accept inspections—if the United States lifts all sanctions.

US Secretary of State Marco Rubio, speaking Thursday from Turkey, said the diplomatic window remains open but warned the decision ultimately rests with Iran’s leadership.

“In the end, the decision lies in the hands of one person, and that's the Supreme Leader in Iran, and I hope he chooses the path of peace and prosperity, not a destructive path,” Rubio told reporters.

Gharibabadi said he and fellow Deputy Foreign Minister Majid Takht-Ravanchi hosted the political directors of the UK, France, and Germany for discussions aimed at advancing diplomatic efforts.

“Iran and the E3 are determined to sustain and make best use of diplomacy,” he wrote on X. “We will meet again, as appropriate, to continue our dialogue.”

A German diplomatic source told Iran International ahead of the meeting that discussions would focus on Iran’s nuclear program, but stressed, “These are not negotiations.” The source said Germany was represented by Dominik Mutter, Political Director at the Federal Foreign Office.

Earlier this week, Iranian Foreign Minister Abbas Araghchi said Iran remained open to talks with Europe, “even if their own policies have led to some isolation in these negotiations.”

Few details have emerged from the meeting, and no major breakthroughs have been announced.

Under the UN resolution that endorsed the 2015 nuclear deal, the three European signatories – Britain, France, and Germany – have the authority to reimpose UN sanctions on Iran through a mechanism known as the "snapback," if they determine that Tehran is not complying with the agreement.

Diplomats told Reuters that the E3 could move to trigger the snapback mechanism as early as August if no significant progress is made in negotiations. The deadline to do so under the resolution is October 18.

Separately, US Secretary of State Marco Rubio met Friday in Istanbul with the national security advisors of the UK, France, and Germany to discuss both Iran and the war in Ukraine, according to a US official and a Reuters witness.

The United States and Iran have held four rounds of indirect nuclear negotiations mediated by Oman since April. Both sides have described the talks as “constructive,” though no formal agreement has been reached.

Meanwhile, during his visit to Persian Gulf states this week, US President Donald Trump said Iran had “sort of agreed” to American terms and declared, “We’re getting very close to a deal.” Trump reiterated that Iran must never obtain a nuclear weapon and warned Tehran faces either “a very, very nice step” or “a violent step — the violence like people haven’t seen before.”

On Friday, Trump added that Iran has received a formal US proposal and must act quickly. Axios reported that the written proposal was handed to Iranian negotiators during the fourth round of talks in Oman and taken back to Tehran for consultation with senior officials.

Iran’s real GDP is set to grow by just 0.3% in 2025, the IMF's Regional Economic Outlook for the Middle East and Central Asia published this month projected.

That’s a sharp fall in its October 2023 estimate for this year of 3%.

The revision appears to reflect the tightening of US sanctions under President Donald Trump, who has promised to slash Tehran’s oil revenues and restrict its access to international finance.

In April alone, the Trump administration imposed eight new packages of sanctions targeting tankers and trading networks that facilitate the sale of Iranian oil. Between January and April 2025, imports from China—Iran’s primary oil buyer—fell to 1.38 million barrels per day (bpd), about 7 percent below the 2024 average.

The IMF estimates both production and exports to fall by 300,000 bpd in 2025. Independent energy analytics firms such as Kpler, Vortexa, and TankerTrackers have predicted a steeper drop, as much as 500,000 bpd.

Surplus narrows, capital flees

Iran’s total exports, including non-oil goods and services, is projected to decline by 16% this year to $100 billion, according to the IMF. Imports are expected to fall 10% to $98 billion, leaving a slim trade surplus of just $2 billion, compared to $10 billion last year.

Despite running trade surpluses in recent years, capital flight remains alarmingly high.

Iran’s Central Bank estimates that $14 billion exited the country in the last nine months of 2024. That comes atop $20 billion the year before. Since 2018, when Trump introduced his so-called maximum pressure campaign against Tehran.

Currency falls, economy shrinks

Perhaps the most shocking of IMF figures is those of Iran’s nominal GDP—which reflects the size of an economy in global terms. Iran’s nominal GDP will fall from $401 billion in 2024 to $341 billion this year, according to the report.

The primary reason behind this dramatic fall is the collapse of Iran’s currency, Rial, which lost nearly half its value in 2024.

While real GDP appears relatively stable domestically as it adjusts for inflation and ignores currency devaluation, the dollar-denominated figures reveal a steep contraction.

In 2000, Iran’s economy was larger than those of the United Arab Emirates, Turkey and Saudi Arabia. Today, all three have surpassed Iran, with GDPs more than three times that of Iran in the case of the latter two.

Prices soar, pockets empty

Adjusting for ever-rising prices in Iran, the IMF has upped its inflation estimate for 2025: from 37% in its last report to just above 43% in the latest.

Iran now ranks fourth in the world in inflation, beaten by Venezuela, Sudan, and Zimbabwe only.

Several factors are fueling the surge: the rial’s collapse, restricted access to foreign reserves, excessive domestic borrowing, and rising import costs under sanctions.

What next?

Most troubling for Iran’s government could be the IMF's estimate that the country would need oil prices to reach $163 per barrel just to balance its 2025 budget. That is more than double the current global average.

In its latest budget, the administration of president Masoud Pezeshkian has assumed daily oil exports of 1.85 million bpd at $67 per barrel. But the IMF expects actual exports to average just 1.1 million bpd, indicating a substantial shortfall.

This is a familiar story. Successive administrations in Iran have run deficits amounting to roughly one-third of total public spending, plugging the gap with heavy borrowing and money printing—both of which have fueled inflation and monetary instability.

The IMF projects Iran’s gross government debt to rise to just under 40% of GDP in 2025, and a couple of points above it in 2026 — troubling figures for an economy already under severe external pressure.

On Wednesday, the Expediency Council gave final approval to the bill that enables Iran to join the Palermo Convention, formally known as the United Nations Convention against Transnational Organized Crime. However, the legislation includes several conditions that could raise concerns for the FATF.

Officials say the Expediency Council is expected to review the second remaining bill, required for joining the Combating the Financing of Terrorism (CFT) Convention, next week.

Ratifying these two conventions is considered a final and necessary step in aligning Iran with FATF standards and can facilitate its removal from the global anti-money laundering body’s black list.

The breakthrough followed a green light given in December by Supreme Leader Ali Khamenei which allowed the Expediency Council to re-examine both bills after years amid political infighting.

Official and media optimism

“The conditional approval of the Palermo bill by the Expediency Council is an important step towards constructive engagement with the world,” government spokeswoman Fatemeh Mohajerani said in a post on X on Wednesday.

“The government welcomes the Assembly’s decision and hopes that national interests, economic benefits, and international considerations will guide the review of the CFT (bill) as well,” she added.

Iran's moderate and reformist media have also widely welcomed the move with optimistic headlines and commentaries.

“This can facilitate Iran’s return to the international financial system and its effective presence in global markets,” Donya-ye Eghtesad economic daily wrote.

“This important development has occurred while signs of progress in negotiations between Iran and the United States are also visible, and optimism about the future of Iran’s economy has increased."

Conditional ratification and FATF concerns

Despite the positive tone, the conditions attached to Iran’s ratification of the Palermo Convention—and the reservations included in the CFT bill—pose serious challenges to the country's full compliance with FATF standards.

The FATF has clearly said that Iran must ratify and implement the Palermo and CFT conventions “without undue reservations”, saying broad or vague reservations can undermine the conventions’ effectiveness and create loopholes for financing terrorism.

Speaking to IRNA after the Council’s decision, Deputy Economy Minister Hadi Khani downplayed the importance of the conditions.

“Many countries have set conditions for accepting these two conventions. Our country’s parliament, too, introduced conditions for certain articles of the conventions,” he said, adding that most of these were based on the principle that Iran would implement the conventions within the framework of its own Constitution.

Some FATF members including the United States, China, and India have ratified the Palermo Convention with the reservation that they do not consider themselves bound by Article 35(2), which involves mandatory dispute resolution by the International Court of Justice (ICJ).

Iran's Palermo legislation includes similar language, excluding ICJ jurisdiction while asserting that decisions on extradition and mutual legal assistance will be made on a case-by-case basis.

Iran has also declared that provisions incompatible with its national laws—many of which are rooted in Islamic Sharia—will not be binding. Pakistan and Saudi Arabia have accepted the Convention with similar reservations.

Moreover, Iran’s legislation explicitly states that accession to the required conventions does not imply recognition of Israel, a FATF member.

The CTF bill also includes language affirming the “legitimate and recognized right” of peoples under occupation to resist and pursue self-determination in apparent reference to the Israeli-occupied Palestinian territories.

FATF’s concerns are particularly related to the reservations included in the CFT bill. Iran's CTF bill does not accept the definitions of terrorism provided by other countries or international bodies if they conflict with its national laws and support for groups that it views as legitimate resistance movements.

Remaining on FATF black list

Iran was on FATF black lists from 2008 to 2016. In February 2020 it was black-listed again and has remained so to date.

While approval of the Palermo Convention and the CFT Convention bills is a critical step, removal from the FATF black list depends on effective implementation, not just legal ratification, and may take several years.

All countries—including allies such as China and Russia—will be obliged to apply enhanced due diligence to financial transactions involving Iran as long as it is on the black list.

In January, former Central Bank official Asghar Fakhriyeh-Kashani revealed that some Chinese banks had closed Iranian accounts to avoid FATF penalties and geopolitical analyst Abdolreza Faraji-Rad told Ham-Mihan daily at the time that Iran’s oil trade with China had to bypass the formal banking system, avoiding cash payments and relying on alternative mechanisms for the same reason.

President Trump arrived in Saudi Arabia on May 13 on the first leg of a four-day, three-country trip to the Middle East that included stops in Qatar and the United Arab Emirates.

The choice of Saudi Arabia for the first state visit of Trump’s second term mirrored that of his first, except this time he did not go to Israel, signaling that the administration is doubling down on its Arabian peninsula partners as key supporters of US regional interests.

Iran was naturally not on the itinerary but ever-present in Trump’s public statements, with the president using a characteristic blend of carrot-and-stick which urged Iranian leaders to take a “new and better path” and warned of “massive maximum pressure” if Tehran “rejects this olive branch.”

Trump expressed his desire to reach a deal with Iran on many occasions, even hinting that a deal was almost agreed. For that to happen, however, Tehran "must stop sponsoring terror, halt its bloody proxy wars, and permanently and verifiably cease its pursuit of nuclear weapons,” he added.

Later, aboard Air Force One, Trump told reporters that Iran had to “make the right decision” about its nuclear program because “something’s going to happen one way or the other” and "we’ll either do it friendly or we’ll do it very unfriendly.”

Arab, Iranian audiences

There are various takeaways for leaders in Iran as well as in its neighboring Arab countries, from Trump’s commentary.

For the latter, Trump’s demand that Iran end its sponsorship of terror and involvement in proxy wars will be welcomed as a signal that any agreement with Tehran might not be narrowly confined to its nuclear program alone, as was the case with the Joint Comprehensive Plan of Action in 2015.

For leaders in Riyadh, Doha and Abu Dhabi - not to mention in Tel Aviv -it was Iran’s regional activities that were as much a priority as its nuclear program, and their exclusion from the negotiations for the 2015 nuclear deal caused alarm in the region.

However, any such optimism in regional corridors of power may be tempered by concern that the president’s unconventional approach to deal-making may create openings for an agreement that gives Trump the optics he desires at the expense of nuts-and-bolts details on specific Iranian commitments.

Deals, details and differences

Comments by Steve Witkoff, Trump’s chief negotiator and one of his closest confidants, in podcast and other appearances, have not given the impression of a details-focused approach to diplomacy, whether in terms of Russia and Ukraine or Iran.

Witkoff and other members of the Trump administration have also sent mixed messages about whether Iran would be able to enrich uranium in any agreement, reinforcing concerns by domestic and regional critics of US engagement with Iran that a new deal may be worse than no deal.

For the leadership in Tehran, beset by economic challenges, energy shortages and geopolitical setbacks that left its regional "Axis of Resistance" weakened, the optics of Trump’s regional procession offer glimpses of opportunity.

The fact that Trump met with Syria’s new president, Ahmed al-Sharaa, in Riyadh and declared that sanctions on Syria would be lifted was further illustration that Trump is transactional rather than ideological, and willing to take decisions that break the mold of conventional American policy thinking.

This was underscored in Trump’s remarks in Riyadh on May 13 when he slammed the failures of generations of western interventionists and neocons in the Middle East who “told you how to do it, but they had no idea how to do it themselves” and, he argued, did far more damage than good.

In making these comments and receiving al-Sharaa, Trump has shown himself willing to break free of traditional constraints on US policymaking in the region, at least on the surface, and this may yet extend to Iran.

Unclear outlook

There are nevertheless multiple uncertainties for Iranian officials as they begin to digest the outcomes of Trump’s visit to the Middle East and assess the implications, both short- and long-term, for Tehran.

The plethora of major deals signed in Saudi Arabia, Qatar, and the UAE have cemented these countries’ deep and longstanding ties with the US across the defense and security, economic, and energy spectrum.

Any concerns in the region of US disengagement from the Middle East may be dissipated by the sight of Trump bestowing such significance on the region, in stark contrast to the disdain with which the administration has treated its formal allies in Europe and North America.

And yet, if Trump is to reap the benefits of the hundreds of billions of dollars of planned investments into the US, he will likely return from his trip with a conviction that the pledges, and the returns, require stability and would be jeopardized by any conflict with Iran.

This not only plays into the de-risking and de-escalatory approach that Iran's energy-rich Arab neighbors have taken since 2020 but may also fortify Trump’s desire to burnish his credentials as a peacemaker in the explosive region.