Foreign Relations & International Law

The Iran Cash: Was It Ransom?

Rishabh Bhandari
Monday, August 8, 2016, 10:29 AM

At a time when the Republican Party has fractured on virtually every front, moments of unity are rare. One such opportunity appeared last week courtesy of a Wall Street Journal story that disclosed how the United States dispatched an unmarked cargo plane carrying $400 million in foreign currencies to Tehran a day after Iran released four Iranian-American detainees.

Published by The Lawfare Institute
in Cooperation With

At a time when the Republican Party has fractured on virtually every front, moments of unity are rare. One such opportunity appeared last week courtesy of a Wall Street Journal story that disclosed how the United States dispatched an unmarked cargo plane carrying $400 million in foreign currencies to Tehran a day after Iran released four Iranian-American detainees. The prisoner release came in exchange for the release or pardon of seven Iranians held in U.S. jails. Every major Republican, including House Speaker Paul Ryan, Senator Ted Cruz and presidential nominee Donald Trump, has pounced on the report as further evidence of Obama’s feckless rapprochement with Iran.

U.S. government officials have insisted that the transaction was unrelated to the detainee swap. The money represented the first installment of a $1.7 billion settlement between Iran and the United States to resolve a 35-year legal imbroglio that centered on a failed arms deal signed just before the 1979 Iranian Revolution overturned the pro-U.S. government of Shah Mohammed Reza Pahlavi. When the White House first announced the financial settlement, President Barack Obama painted it as a victory for U.S. taxpayers when he said “Iran will be returned its own funds, including appropriate interest, but much less than the amount Iran originally sought.”

There’s truth to this claim. In 1981, Tehran and Washington established an international claims tribunal in The Hague to resolve outstanding contractual and property disputes between the two nations. This deal constituted an extension of the tribunal’s work over the past three decades; the tribunal has already settled more than 4,700 claims and issued more than 600 awards. Indeed, U.S. officials said they were certain Washington would lose this arbitration in The Hague and Iran had asked for upwards of $10 billion in the settlement.

Gary Sick, who served as President Jimmy Carter’s chief aide on Iran during the embassy hostage crisis, approved the deal resoundingly when he told the Washington Post, “I thought it was a brilliant stroke to get things taken care of, leaving us a tabula rasa to begin afresh if we do decide to resume diplomatic relations. All the old lingering, festering doubts and cases will have been removed.” Barbara Slavin, the acting director of the Future of Iran Initiative at the Atlantic Council, said, “this dispute has been festering for more than three decades, and it was good to get it resolved.”

State Department spokesman Mark Toner said on Wednesday that the U.S. government assembled three separate teams of negotiators to conduct talks with Iran on the nuclear deal, the prisoner swap, and the financial settlement. He added that the decision was made this way to insulate the administration from complaints that the three deals were linked. The administration would do well to also point out that the U.S Treasury Department also imposed new sanctions over Iran’s ballistic weapons program on the same day that the airlift was made.

Yet even if the deals weren’t at some level linked—a questionable claim given that senior State Department officials, including Middle East expert Brett McGurk and Secretary Kerry were involved in both the financial and prisoner deals, according to a Journal article in January—the country’s divided reaction to these recent revelations suggests that the financial settlement has become a Rohrschach’s test on the administration’s broader Iran policy.

For supporters of the nuclear deal, this side-track settlement is a boon for U.S. taxpayers. Even before the nuclear deal had been concluded, experts on both sides had called for the United States to settle its financial disputes with Iran. Lawfare’s John Bellinger made this same point in 2014, for example, when he wrote an oped in the Wall Street Journal endorsing the resolution of all outstanding U.S.-Iranian claims.

Conversely, for those opposed to the nuclear deal, this latest revelation follows a suspicious pattern of administrative subterfuge that conceals the flaws of the White House’s Iran policy or, even worse, an intentional strategic realignment in the region. The executive branch has administered a number of self-inflicted wounds since the Iran nuclear deal was completed. These have included the smug profile of Ben Rhodes in the New York Times Magazine that implied the administration deliberately misled Congress and the public over the deal; a sloppy omission from an official White House transcript of an acknowledgement by Josh Earnest that he could not guarantee that no U.S. official lied publicly over the course of selling the deal; and an admission from the State Department that it intentionally edited and deleted video from an archived press briefing to conceal statements it made about the deal.

Each of these moves, when viewed independently, likely won’t change many people’s minds about the merits of the deal. But in a democracy, voters have a limited reserve of time and concern for even the most critical policy debates. When collectively strung together, these measures of secrecy suggest there is something under the surface that justifies the hyperbolic and conspiratorial narrative that the nuclear deal’s most fervent opponents are weaving.

In this case, the reality is probably somewhere in the middle. In a complex relationship such as ours with Iran, a certain degree of juggling multiple balls at once is not only inevitable but the norm. That said, it strains credulity that top State Department officials such as Kerry and McGurk weren’t having internal discussions that linked the two issues or thinking about them in conjunction with one another.

As U.S. officials confirmed to the Journal, Iran’s negotiators wanted something tangible, such as the financial settlement, to take home as part of the prisoner swap. There are few other plausible reasons for the administration to be willing to take such a major political hit by sending the money so immediately after the detainee negotiations had been concluded. Saeed Abedini, one of the U.S. detainees, told FOX Business that he was not freed at first because the Iranians were “waiting for another plane.”

Many in Iran have certainly treated the money as a ransom. At the time of the deal, the Iranian commander of the Basiji militia, Mohammad Reza Naghdi boasted, “Taking this much money back was in return for the release of the American spies.” But that’s to be expected; such rhetoric makes the government look strong in the eyes of the Iranian public. Iranian hardliners had already passed a budgetary amendment mandating that all $1.7 billion earned from this financial settlement be earmarked for the military.

The Rorschach test reaction to the Journal’s story is, on one hand, a testament to the reality that politics no longer stops on the water’s edge. But it is also an indication that the United States’ long-standing policy of never negotiating with terrorists is easier to enforce against a non-state actor than against a country with whom we have a number of outstanding issues to resolve. Our relationship with a terrorist group such as Al Qaeda is inherently and solely adversarial. But we must negotiate with Iran across a wide range of issues. In these cases, linkages--sometimes overt, sometimes implicit--between various diplomatic tracks are unavoidable. All that the White House can do is be relatively transparent about these realities and stomach the ensuing political costs upfront. Anything short of this standard only delays the inevitable pain and engenders conspiracy theories that exaggerate the links.

Rishabh Bhandari graduated from Yale College with degrees in History and Global Affairs. His senior thesis focused on the decision making of the Nixon administration in response to the 1971 Bengali Genocide. He is pursuing a doctorate in international relations at Oxford University.

Subscribe to Lawfare