The 400 Million Dollar Question

Did the Obama Administration give $400 million dollars to Iran in exchange for hostages? In a word, no. Let me explain. The $400 million that the United States sent to Iran is part of a larger installment of $1.7 billion[1], of which $1.3 billion is interest.[2]

The money was not for the 4 American hostages freed the day after, that was a separate deal (and negotiating team)[3] that lasted for about a year, one that involved five Americans, including Pastor Saeed Abedini and Washington Post journalist Jason Rezaian in exchange for 7 Iranians, six of whom are dual American-Iranian citizens, even though none of them have as of yet returned to Iran.[4]

The $400 million sent to Iran was their money to begin with. Before the Iranian revolution in 1979, the government under Shah Reza Pahlavi requested and paid for some U.S. fighter jets.[5] The jets were never delivered, and all Iranian assets were frozen during the hostage crisis. The Iranians didn’t get what they paid for and wouldn’t be refunded. The Algiers Accords in 1981 sought to settle some financial disputes between the two countries, but did not resolve everything. The Iran–United States Claims Tribunal was then set up to resolve these other issues, to which Iran wanted $10 billion for the original $400 million dispute.[6]

“U.S. officials had expected a ruling on the Iranian claim from the tribunal any time, wrote Associated press reporter Matt Lee, “and feared a ruling that would have made the interest payments much higher.”[7] This deal wasn’t secret either. Obama discussed it back in January, saying that “for the United States, this settlement could save us billions of dollars that could have been pursued by Iran. So there was no benefit to the United States in dragging this out. With the nuclear deal done, prisoners released, the time was right to resolve this dispute as well.”[8]

And the United States has also benefited from the Claims Tribunal during its first 20 years, to the tune of $2.5 billion in awards to U.S. nationals and companies.[9] Both the 35-year-old settlement and the hostage situation ended up being resolved just a day apart, hitting two birds with one stone. Whether or not it was a ransom payment, the Iranians would have gotten the money no matter what.

“Iranian press reports have quoted senior Iranian defense officials describing the cash as a ransom payment”, noted the Wall Street Journal in the article that started the entire controversy, albeit 7 months late.[10] Reportedly, senior Justice Department officials objected to paying the $400 million over concerns that the Iranians would consider it a ransom payment, sending some wrong signals.[11] But that’s just Iran being Iran, trying to look strong to their domestic audience.

Nonetheless, I do believe that the actual deal could have gone through more legal channels. As Andrew C. McCarthy puts it, “The law on which the anti-terrorism sanctions are based gives the president broad waiver discretion. [Obama] could have issued a waiver in order to enable our government to pay Iran.”[12] Not to mention that I am also concerned about where the money would actually go, seeing that Iran is a state-sponsor of terrorism. Where it would end up though, I have no idea.

But in the end, using the words of acting director of the Future of Iran Initiative at the Atlantic Council Barbara Slavin, “It was an opportunity for countries with no diplomatic relations to clear away a number of diplomatic disputes. For the U.S, it was important to get back the detained Americans, and the Iranians wanted their seven citizens out of jail.”[13]

















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