The potential prisoner exchange between the US and Iran recently, and the transfer of $6 billion in Iranian oil revenue stuck in South Korea are developments that the Biden administration continues to insist are not connected. Simultaneously, Iran is recording its highest oil sales to China than it has in a decade - alongside talks of limiting its uranium enrichment - a key matter on the US agenda. 

With this, the "shadow diplomacy" between both nations, done through intermediaries including Oman and Qatar, is mirroring an understanding which entails that fully bringing back the 2015 nuclear deal is a political impossibility.

Last week, Iran announced the intent to transfer four US citizens from prison to house arrest, and to be released around the same time the US releases a few Iranian counterparts and allows South Korea to unfreeze the $6 billion assets back to Iran for medicine and humanitarian goods.

That happens to coincide simultaneously with a sign of boost in Iranian oil sales.

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Randa Slim, director of the Conflict Resolution and Track II Dialogues Program at the Middle East Institute in Washington said, “Both President Biden and the Iranians were not going to be ready to go for a bigger deal at this point,” adding, “This is what’s feasible politically in both places, and let’s see if they can build on it.”

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A test of Iranian 'sincerity'

Iran’s sincerity is expected to be tested by the beginning of September when International Atomic Energy Agency (IAEA) monitors will inform diplomats about changes to Iran's nuclear stockpile. 

According to a European envoy who previously brokered communication between the two nations, the IAEA inspections report will bring a key agency meeting in Vienna, Austria, expected to host officials from both countries. Additionally, informal contacts may continue talks on the sidelines of the agency’s annual meeting on September 25.

Meanwhile, US officials have refused to speak on the scope of both indirect and direct conversations with Iran.

“Nothing about our overall approach to Iran has changed,” US Secretary of State Antony Blinken explained to reporters on Tuesday, adding, “We continue to pursue a strategy of deterrence, of pressure, and diplomacy.”

"In any instance where we would engage in such efforts to bring Americans home from Iran, Iran’s own funds would be used and transferred to restricted accounts such that the monies can only be used for humanitarian purposes, which, as you know, is permitted under our sanctions," Blinken indicated.

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Data intel firm Kpler stated that Chinese imports of sanctioned Iranian oil are currently at their highest level in at least a decade, and the US argues that the sanctions it imposed haven't given any effect but tackling the sales isn't a priority for it - taking into consideration the efforts to keep oil prices low in light of the war in Ukraine and Saudi Arabian efforts to limit supply.

Helima Croft, head of global commodity strategy at RBC Capital Markets LLC, stated, “As this is not a formal diplomatic agreement, we do not anticipate any announcement of sanctions relief to be forthcoming,” arguing that "What we anticipate is the acceleration of the trend of de minimis sanctions enforcement to enable Iranian barrels to reach the Asian market.”