U.S. Payment of $1.7 Billion to Iran Raises Questions of Ransom Wiring of disputed money to Tehran coincided with departure of plane carrying 3 Americans By Jay Solomon
http://www.wsj.com/articles/u-s-payment-of-1-7-billion-to-iran-raises-questions-of-ransom-1453421778
The U.S. Treasury Department wired the money to Iran around the same time its theocratic government allowed three American prisoners to fly out of Tehran on Sunday aboard a Dassault Falcon jet owned by the Swiss air force.
The prisoner swap also involved freedom for two other Americans held in Iran as well as for seven Iranians charged or convicted by the U.S.
The announcements coincided with the implementation of the nuclear agreement with Iran, lifting international economic sanctions in exchange for Iran curtailing its nuclear program.
The $1.7 billion financial settlement ended a 35-year legal saga that centered on a purchase of U.S. arms by Iran’s last monarch, Shah Mohammad Reza Pahlavi, that were never delivered because of the Iranian revolution in 1979.
The White House described the settlement as a victory for taxpayers, arguing that the U.S. was likely to lose in arbitration under way in The Hague, Netherlands, and could have been held liable for billions more if the process had dragged on.
“Iran will be returned its own funds, including appropriate interest, but much less than the amount Iran sought,” President Barack Obama said on Sunday.
But the transaction is stirring a debate here over whether the funds were essentially a ransom paid to Iran’s leadership.
A senior Iranian military official has publicly stated that the clearing of the $1.7 billion was a key factor in Tehran’s decision to release the imprisoned Americans, most of whom were charged with espionage.
“Taking this much money back was in return for the release of the American spies and doesn’t have to do with the [nuclear] talks,” said Gen. Mohammad Reza-Naghdi, commander of Iran’s powerful Basij militia, in state media on Wednesday. “The way to take our rights back from the arrogants [Americans] is to become powerful, and we must grow stronger and stronger every day.”
Iranian government spokesmen in Tehran and New York didn’t respond to requests for comment on Thursday.
White House and State Department officials have denied any connection between the payout of the disputed funds and the prisoners’ release.
“This is actually the result of a long-running claims process,” White House spokesman Josh Earnest said Tuesday.
But Republican lawmakers are calling for an inquiry. They’ve also criticized what they said was an imbalance in the prisoner exchange: The White House freed seven Iranians and dropped extradition proceedings against another 14 in exchange for the five Americans.
“There’s no way the recent events occurred randomly,” said Rep. Mike Pompeo (R. Kan.), who wrote Secretary of State John Kerry this week to ask about the payment. “We will do our best to find out if this was in our interest.”
U.S. officials said the $1.7 billion came from a permanent Treasury Department fund established to cover court judgments and settlements.
But some lawmakers also are questioning why the White House didn’t use the $1.7 billion to compensate U.S. terror victims. Iran has lost numerous court cases in the U.S. tied to terror attacks Tehran allegedly supported.
Iran, during the 38-year reign of the shah, was one of the U.S.’s closest allies in the Middle East and bought billions of dollars worth of U.S. arms.
Just weeks before the regime fell in 1979, it concluded a new military agreement with the Carter administration. U.S. officials said it was valued at $400 million, but American companies never delivered the weapons because of the Islamic revolution.
Iran’s new leaders quickly demanded compensation. In 1981, Tehran and Washington established an arbitration court in The Hague to settle this and other financial disputes tied to the shah’s rule. The tribunal has awarded more than $2.5 billion to American claimants over the past four decades, and around $1 billion to Iran.
U.S. officials said Iran’ began regularly raising the issue of the $400 million again following the election in 2013 of President Hassan Rouhani.
The cleric’s more moderate government sought improved ties with the West and an end to the nuclear dispute with the U.S. But Tehran’s lawyers in The Hague were demanding billions in compensation on top of the original $400 million. The Iranians cited accrued interest and a different assessment of the initial value of the contract.
Senior Obama administration officials said in recent days the deliberations at The Hague were constructive, but that there was a belief in Washington the U.S. would lose the arbitration.
The White House agreed to settle and pay $1.3 billion in interest on top of the original arms contract.
“We reached a judgment that this settlement would result in a substantial reduction in our exposure at the tribunal,” said a senior U.S. official.
The settlement talks dovetailed with the secret talks being pursued by the U.S. and Iran to secure the release of their prisoners.
The White House has described the two issues as distinct. But top State Department diplomats involved in negotiating the prisoner swap, including Mr. Kerry and Brett McGurk, a Middle East specialist at the State Department, were concurrently working to ensure the $1.7 billion payment was cleared by last weekend, according to people involved in the deliberations.
One person said Mr. McGurk was involved as early as Christmas in helping to complete the payment. Mr. Kerry announced the agreement on Sunday, almost at the same time as the Americans were released.
The State Department declined to comment on the roles Messrs. Kerry and McGurk played in resolving the financial dispute.
U.S. lawmakers welcomed the freeing of the Americans last weekend. But a number of Republicans, including the speaker of the House, Rep. Paul Ryan of Wisconsin, were quick to raise concerns that a ransom had been paid.
John Bellinger, who served as chief legal counsel in the State Department during the George W. Bush administration, wrote this week that just the timing raised the perception that the U.S. was willing to pay ransom.
“Administration officials deserve credit for this diplomatic success; it would still be regrettable if Iran received monetary compensation in exchange for Americans detained and held illegally,” he wrote on the website Lawfare Monday. “If the two actions were not linked, the administration should not have announced the Claims Tribunal settlement on the same day the Americans were released.”
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