America's $400 Million 'Ransom' To Iran

On January 17, 2016 the United States government agreed to pay the Iranian government $400 million plus approximately $1.3 billion in accumulated interest. On the same day, a plane filled with Swiss francs, euros, and other foreign currencies was dispatched from the US and was unloaded at Tehran's Mehrabad Airport. Also on that day, four American hostages were released. If only these three facts are taken into consideration, then the American government would have looked like it was paying a ransom to a foreign government, without any approval from Congress.

But this is not the case. The $400 million in question was placed in a Pentagon trust fund by the regime of Shah Pahlavi before the Iranian revolution. To be used towards the purchase of fighter jets, spare parts, and other military hardware from the US. After an article was published in the Ettela'at newspaper on January 7, 1978, Iranian students began to protest. And the protest grew into a nationwide revolution, deposing Pahlavi and making Ayatollah Khomeini the spiritual leader of the Iranian people; creating the Islamic Republic of Iran.

Following these events, and the taking of 52 American hostages from the US Embassy on November 4, 1979, the US government refused to deliver any military hardware to the Iranian government. But the US also did not return the $400 million down payment. Then on November 14, 1979 President Carter signed Executive Order 12170. Freezing all Iranian assets held in the US, including the money held in the trust fund. Events at the time may have made these US actions prudent, but it does not change the fact that the $400 million did not belong to America.

To resolve the conflict, a third party was brought in to mediate the issues between Iran and the US. And on January 19, 1981 the Algiers Accord was signed by the US and Iranian officials. The accord called for the establishment of a tribunal, later named the Iran - United States Claims Tribunal (IUSCT); as well as the un-freezing of many Iranian assets immediately following the signing. The Algiers Accord stated that if both sides could not come to an agreement outside of the tribunal, then both sides would submit to the arbitration of the tribunal in disputes.

When Barack Obama began his second term as President, the IUSCT had yet to finalize a ruling on the $400 million payment. Rather than waiting for the IUSCT ruling, which could have been very harsh towards the US, the Obama administration decided to try and negotiate an out of court settlement. These negotiations were held concurrently with a negotiation on Iran's nuclear program, and a negotiation to free four US citizens held hostage in Iran. These were concurrent negotiations, not complementary negotiations.

As for the timing of the payment, the fact that the hostages were not released until the initial payment landed on Iranian soil. I can see how many people would find that coincidental, if they do not know much about the history of Iran. The blatant attempts by Iran in the past to control the timing of events to manipulate perception and give them propaganda are numerous. The prime example is not releasing the 52 Embassy hostages until the day that Reagan was sworn in as President, and not a day sooner; because of all their previous anti-Carter propaganda.

And the method of transfer for the funds? American law (which is made by Congress) at the time of the transfer still prohibited US and foreign banks from dealing in dollars with Iran. Due to a lack of an established banking relationship between the US and Iran, there was no path to wire the money to Tehran. And why there were no dollars on board the airplane on January 17, 2016.

And the amount of interest settled in the matter, $1.3 billion, comes to approximately 3% interest on the original $400 million. The Iranians were trying to get $8-9 billion in interest through the IUSCT. While I don't like the idea of giving a country like Iran (or any other non-secular state) skids full of cash. This move was to clear the diplomatic table of an old item, one that the Iranians have been complaining about for 37 years. Which will in the end give the US better leverage at the diplomatic table with Iran in the future.