US-Iran ceasefire memorandum under strain amid disputes over Hormuz and sanctions

ISLAMABAD: Renewed confrontation between the United States and Iran is placing their interim June agreement under increasing pressure, as both sides clash over the Strait of Hormuz, sanctions relief and other unresolved terms in the 14-point Islamabad Memorandum of Understanding.

The agreement declared an end to the war and said the Strait of Hormuz would be open to commercial shipping, but key provisions were left imprecise and major issues, including the future of Iran's nuclear programme, were deferred to a later phase of negotiations. Analysts said that ambiguity has now become a central source of dispute.

Public positions harden

US President Donald Trump said last week that the initial ceasefire arrangement was over, accusing Iranian officials of failing to honour the terms they had negotiated. On Monday, he also said the United States would probably take over the Strait of Hormuz.

Iranian Foreign Ministry spokesperson Esmaeil Baghaei, also speaking on Monday, said Washington was pushing the memorandum into crisis and accused the United States of repeatedly breaching its commitments. Pakistan, which mediated the understanding, has called on all sides to observe the terms they agreed to.

Dispute over the Strait of Hormuz

The current crisis has centred on the strategic waterway after the war, which began with US-Israeli strikes on Iran on February 28. Following the outbreak of hostilities, Tehran effectively closed the strait, through which about one-fifth of the world's oil and liquefied natural gas had previously moved.

Article 5 of the memorandum states that commercial vessel traffic would resume immediately and that Iran "will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only, from the Persian Gulf to the Sea of Oman and vice versa."

Tehran reads that clause as acknowledging its authority to administer the entire waterway, while waiving fees or tolls for 60 days. The United States and Gulf states reject that interpretation and say the provision means Iran is required only to enable safe passage and refrain from enforcing restrictions by force. Washington has said the strait must remain free of tolls.

Over the past week, Iran has fired at vessels it said were attempting to pass through the waterway on an unapproved route, and it has again declared the strait closed. The US Navy's Joint Maritime Information Centre said on Sunday that a southern passage through the strait remained open and had been widened to allow two-way traffic.

Oil waivers and frozen funds

Article 10 of the memorandum provides that Washington will issue waivers permitting the export of Iranian crude oil and petroleum products, along with related banking, insurance and transport services. The provision was significant for Iran after years of sanctions pressure on its economy.

But on July 7, the United States withdrew a licence that had allowed Iran to sell oil, saying Tehran's actions in the Strait of Hormuz were wholly unacceptable and would carry consequences. Iran denounced that move as a violation of the memorandum.

Article 11 states that the United States undertakes to make available Iran's frozen or restricted funds and assets, with both sides to agree on procedures for their release during negotiations. Those assets include $6 billion in Qatari accounts. Qatar said on June 30 that it had not transferred the money to Tehran.

On June 22, US Vice President JD Vance said the United States and Qatar would control the funds once unfrozen and that the money could be used to purchase US corn, soy and wheat. Iran's ambassador to the United Nations in Geneva, Ali Bahreini, responded that only Iran would determine how those assets were spent.

Lebanon and the path ahead

Iranian parliament speaker and chief negotiator Mohammad Bagher Ghalibaf said on July 8 that Israeli attacks in Lebanon also breached the memorandum. Lebanon became part of the conflict after Iran-backed Hezbollah opened fire on Israel on March 2, prompting an Israeli offensive and invasion in the south. Iran had maintained that a ceasefire in Lebanon should form part of the deal.

The memorandum says Tehran and Washington are committed to negotiating a final agreement within a maximum of 60 days, with an extension possible if both sides agree. However, with disagreement over control of the Strait of Hormuz still unresolved, no date has been announced for further talks.

Mohanad Hage Ali of the Carnegie Middle East Centre said the agreement now required a follow-up arrangement if it was to remain the basis for de-escalation.

"The MoU is in crisis, and you now need a secondary deal to restore it, if it is to be a basis for restoring calm", he stated.

He added: "The vagueness reflected the difficulty of the issues and the fragility of the agreement."