Iran demands war reparations; Trump seeks U.S. compensation instead
President Trump has settled on economic pressure as his latest strategy in the five-month U.S.-Iran conflict, reluctant to resume all-out war and wary of diplomatic negotiations, according to U.S. officials. Trump has adopted a wait-and-see approach that would give financial sanctions and a U.S. naval blockade of Iranian ports more time to inflict economic harm, and he told aides he prefers not to order more strikes.
Aides pushed the strategy by showing Trump statistics on the effects existing sanctions have leveled on Iran, a senior administration official said. Top cabinet and White House officials have advised the president that tightening current penalties and issuing fresh ones could prove his most effective option in forcing Iran to capitulate, according to people familiar with recent discussions.
“They have no money,” Trump told reporters Monday. “Iran is broke, totally broke.”
Iran rejected the approach. Esmail Baghaei, a spokesman for Iran’s foreign ministry, said the tactic wouldn’t work and shows that the U.S. was incapable at diplomacy. “The real risk is that American politicians, clinging to this bad habit, will instead strangle their own remaining chances of a less humiliating exit from a crisis of their own making,” Baghaei said in a statement posted on social media. When asked for comment, the White House referred the Journal to Trump’s public statements on Monday.
Trump has relied on an economic “maximum pressure” campaign since his first term in a bid to force Iran to abandon its nuclear program. Tehran has resisted the effort and seized control of the Strait of Hormuz, responding with its own list of demands. Trump has told advisers Tehran has proven more resilient than he initially thought and that the Iranian government doesn’t negotiate in good faith, administration officials said.
The five-month deadlock was on full display in recent days. On Saturday, Iran insisted on its highest price yet to allow the free flow of shipping in the waterway: reparations for damage the U.S. inflicted after five months of war. Trump rejected that offer Monday, countering that Iran should compensate the U.S. for killing American forces over the decades as well as the families of Iranian protesters slain in recent demonstrations.
“I have instructed my representatives to put this firmly into any, and all, future negotiations,” he posted to Truth Social, adding that Iran also must answer for its deadly network of regional proxies in the Middle East.
Before the war, some senior aides advised Trump the economic chokehold could be enough to topple Iran’s government. Instead, Trump opted for strikes to crush the government and its nuclear ambitions. When that didn’t work, Trump switched to negotiations that produced an interim peace agreement aimed at reopening the strait, capping uranium enrichment and welcoming Iran back into the international community. The deal’s collapse and resulting burst of violence led the administration to reconsider its approach.
Trump’s top aides in recent days have argued economic punishment at this point in the war could be more effective than military strikes. Mike Waltz, the U.S. ambassador to the United Nations, said Sunday on Fox News that Tehran was more afraid of Treasury Secretary Scott Bessent than Defense Secretary Pete Hegseth. “They’ll absorb the bombings, they don’t care about their military, they don’t care about their soldiers or even the Iranian people after they massacred 40,000 of them,” Waltz said, referring to the Iranian government’s January crackdown on protesters. “They’re worried that their currency is tanking, inflation is the highest in 80 years,” and they are begging the U.S. for cash during negotiations, he added.
Last week, Bessent said the Strait of Hormuz would become “irrelevant” within two years, asserting that 50% to 70% of the energy that transits the waterway will eventually flow through underground pipelines. “It is going to become just another body of water,” he told a news channel in Arizona. Last month, Bessent said the administration’s economic policies pushed Iran’s currency into “free fall” and the inflation rate into triple digits.
Trump could change his mind again on which strategy to pursue, the officials said, especially if Iran responds aggressively. They noted the pause in military strikes could be enough to calm the roiling energy trade.
“This is the optimal space to occupy if we could get more and more oil out to market despite the threats,” said Richard Goldberg, a former senior adviser to the White House National Energy Dominance Council. “A bad deal essentially subsidizes Iran’s reconstitution, while major military escalation risks major oil market dislocation if the regime can withstand the hits and fire back with precision on Gulf energy.”
The drawback is that Iran is likely to retaliate. “Could the U.S. naval blockade worsen Iran’s already dire economic situation? Absolutely, which is why nobody should expect Iran to just sit idly by as that happens. It will hit back,” said Eric Brewer, who served in senior nuclear-related roles in the White House and the U.S. intelligence community. “Iran has proven to have a higher pain tolerance than the United States. I’ve seen nothing to suggest that’s changed.” “There are no good options here for the U.S., only bad ones,” Brewer added.
Republicans are increasingly concerned the war will drag on and hurt the party in the midterm elections, where an already slim GOP control of Congress is on the line. An Associated Press-NORC poll conducted in late July showed just 28% of U.S. adults approve of how Trump is handling the war, down from 34% a month earlier. A majority of Republicans, 61%, approve of Trump’s stewardship of the conflict, but that number fell slightly from June.
Trump privately has floated the idea of declaring victory in the war if Iran fully reopens the strait, even without a nuclear deal, the Journal previously reported. U.S. attacks on three Iranian nuclear sites last year blocked Tehran’s path to acquiring a nuclear weapon, Trump recently told senior aides in meetings, assessing that U.S. intelligence capabilities would likely catch any attempts to rebuild those facilities or covertly build a bomb.
Vice President JD Vance told Fox News last week the U.S. would continue to pressure Iran to make long-term changes in its relationship with Washington. “And if not, that’s fine, too, we’re just going to keep on applying the pressure we can apply, and getting as much oil and gas out of the Middle East so that Americans can enjoy lower gas and energy prices,” Vance said. “We’re in the middle of the game.”