– The US did not pay a $400 million “ransom” to Iran. Here’s what actually happened:
This dumb controversy is everything wrong with our Iran debate.
On the morning of January 17, several wooden pallets arrived at Tehran’s Mehrabad airport. The unassuming pallets were stuffed with foreign cash — $400 million worth, to be exact. Their origin point? The United States.
That same day, four US citizens detained by Iran were released from Iranian custody.
These facts, uncovered in a recent Wall Street Journal piece, have set off a major firestorm inside the United States. Republicans and conservatives, including Paul Ryan and Donald Trump, have alleged that the payment was part of secret ransom deal the Obama administration made with Iran to free the prisoners.
“If true, this report confirms our longstanding suspicion that the administration paid a ransom in exchange for Americans unjustly detained in Iran,” Ryan’s outraged statement read. “It would also mark another chapter in the ongoing saga of misleading the American people to sell this dangerous nuclear deal.”
It’s easy to see how the timing is suspicious. But Ryan, Trump, and other critics have the facts wrong. The Wall Street Journal story is actually describing a payment that President Obama announced back in January. What’s more, the payment was the result of a 35-year case in international court — and had nothing to do with any “hostage” payments.
Once you understand these facts, you will understand that this isn’t actually a story about the Obama administration paying a secret ransom to Iran. It’s a story about the way Washington’s debate over Iran is fundamentally broken.
What literally happened
In very simple terms, this payment is the first installment of a refund for a weapons purchase America never delivered. It starts in 1979, the year of the Iranian Revolution.
In November 1979, a group loyal to the revolutionary regime took 52 Americans hostage at the US Embassy in Tehran. In response, the United States severed diplomatic relations with Iran and froze Iranian assets in America.
Crucially for the present issue, it also halted a delivery of fighter jets that Iran’s pre-revolution government had already paid $400 million for. Normally the US would return the money if it wasn’t going to deliver the planes — countries don’t just break formal agreements like that. But it had frozen Iranian assets in the US as punishment for the hostage-taking — and that included the $400 million.
The hostage crisis was eventually resolved in 1981, at a conference in Algiers. But the Algiers Accords didn’t resolve every outstanding issue — including the legal status of the $400 million.
Instead, it set up an international court, based in the Hague, to deal with any legal claims that the governments of Iran and the United States had against each other, or that individual citizens of the two countries had against the other country.
This court, called the Iran–United States Claims Tribunal, functioned as a kind of binding arbitration. In any case, the involved parties could either negotiate a settlement out of court or take it to a panel made up of three US-appointed judges, three Iranian-appointed judges, and three neutral judges. The panel would then hear the case and issue a binding ruling.
This process, as you might guess, was very, very slow. By the time Obama’s second term in office began, the tribunal still had not come to a ruling on the issue of the $400 million. Sometime afterward, the Associated Press’s Matt Lee reports, the US government apparently concluded that it was going to lose the case — and lose big: Iran was seeking $10 billion in today’s dollars.
“US officials had expected a ruling on the Iranian claim from the tribunal any time, and feared a ruling that would have made the interest payments much higher,” Lee writes.
So the Obama administration decided to settle out of court, opening up negotiations with Iran on the terms of the settlement. It did this at the same time it was negotiating the nuclear deal and the return of four US citizens who had been detained by Iran more recently. However, the people working on the nuclear deal and the prisoner release were different from the team working on the court case — some of whom had been involved with the claims tribunal for years.
By January 2016, the countries had struck a deal — the US would pay Iran $1.7 billion, which amounts to about $300 million in interest on top of the originally frozen assets (accounting for inflation).
The settlement was announced the same day in January as Iran received its first round of sanctions relief from the Iran deal.
The $400 million payment, delivered in foreign cash because US law prevents the government from giving Iran dollars, was the first installment toward the $1.7 billion total. Getting together large amounts of foreign cash is hard, apparently — hence the installment plan.
So there you have it. The payment, which sounds really shady out of context, was actually the end of a boring, decades-old international legal case totally unrelated to the hot-button nuclear and prisoner issues.
What’s the evidence that this was a hostage payment?
Almost immediately after the $1.7 billion deal was announced, critics began suggesting that all was not as it seemed. The timing of the decades-old weapons payment settlement and the hostage release suggested that it wasn’t just a settlement on a legal issue — it was a ransom payment.
“A deal that sent $1.7 billion in U.S. funds to Iran, announced alongside the freeing of five Americans from Iranian jails, has emerged as a new flashpoint amid a claim in Tehran that the transaction amounted to a ransom payment,” the Wall Street Journal’s Jay Solomon, who also co-wrote the recent piece that broke the $400 million payment story, reported at the time.
But there was no direct evidence to back up this theory. The speculation about timing was just that — speculation.
Moreover, the basic logic of it didn’t make any sense. Iran was going to get that money back no matter what through the arbitration process — probably more, if the Obama administration was right. Why would it release potentially valuable hostages in exchange for money it would have gotten otherwise? Iran would have to be the world’s dumbest hostage taker.
The August Wall Street Journal piece, written by Solomon and Carol Lee, attempted to resolve these questions. It uncovered that the first $400 million payment, which was part of the $1.7 billion total settlement, happened on the same day as the hostage release — and that the Obama administration clearly chose not to include that particular fact in its announcement back in January.
That’s suggestive of a link between the hostage negotiations and the weapons settlement, but it’s hardly conclusive.
Beyond that, the WSJ report contained two real pieces of evidence suggesting that the arms deal payment was actually ransom.
First, Iranian negotiators involved in the prisoner exchange allegedly linked the two: “US officials also acknowledge that Iranian negotiators on the prisoner exchange said they wanted the cash to show they had gained something tangible,” Solomon and Lee report.
But the Iranian negotiators on the prisoner exchange were not the same negotiators involved in the weapons deal settlement. Therefore, they couldn’t make demands of the US team negotiating the weapons deal settlement, which means they couldn’t negotiate a quid pro quo of money for hostage release, the definition of a ransom.
So even if this report is true — and you should always be skeptical of anonymous unquoted references to “US officials” — the Iranians would have gotten the money no matter what.
The second piece of evidence for the payment being a ransom is that the Iranians spun it that way. “Iranian press reports have quoted senior Iranian defense officials describing the cash as a ransom payment,” write Solomon and Lee.
But of course Iranian officials would spin it as a hostage payment. This makes them look strong to their domestic audience and America look weak. We don’t take political spin from American officials at face value, so we shouldn’t take Iranian spin at face value either — especially when it’s contradicted by independent evidence.
One could make the argument, I suppose, that the timing was a form of ransom. By delivering the payment on the same day as the prisoner release, Iranian officials could claim that they got the money as part of a ransom deal.
But the truth is that the Iranians could have claimed that no matter when the cash was delivered. If the Obama administration had forked over $400 million six months later, those same Iranian defense officials could have lied and said it was part of the prisoner release deal rather than the weapons settlement.
The lie isn’t significantly more credible just because the cash was delivered on the same day. Nor should American media and politicians help validate the Iranian lie by treating Iranian propaganda as actual evidence.
The bottom line, then, is that the new Wall Street Journal piece uncovers no real evidence suggesting that the US agreed to give Iran money that it wouldn’t have gotten otherwise as part of the hostage release deal. There’s smoke here, but no fire.
This shows how our Iran debate is broken
There’s a bigger problem here, one that goes well beyond a hyperbolic reaction to one Wall Street Journal story. Because this isn’t really about one cash payment to Iran — it’s about the fundamentally broken way we talk about Iran.
Every debate about Iran in Washington nowadays is really a debate about the Iran nuclear deal.
Basically, one camp says the US should welcome a settlement that defuses tensions with Iran on this one specific issue, while the other sees Iran as a fundamentally hostile actor that cannot — and should not — be compromised with.
That second camp sees the deal as a huge step toward the US accommodating Iran more broadly in the Middle East, which they believe would be a disaster of epic proportions. So they campaign, relentlessly, to undermine the nuclear deal — with the support of most of the Republican Party.
Indira Lakshmanan has a revealing story in Politico on the “plan to undo the Iranian nuclear deal” by preventing Iran from reentering the global economy, and the “constellation of pressure groups, analysts, lobbyists and lawmakers” who are hard at work trying to make it happen.
The problem, though, is that the nuclear deal is actually working pretty well.
When you talk to technical experts, they tell you that Iran is abiding by the deal’s terms. The Iranians have cut down on the number of centrifuges, limited their stockpile of enriched uranium, and done many other things that have made it much harder for them to build a nuclear bomb.
“I think it’s gone very well,” Jeffrey Lewis, director of the East Asia Nonproliferation Program at the Middlebury Institute of International Studies at Monterey, told me last month. “The [International Atomic Energy Agency] has been regularly reporting on Iran’s compliance, and Iran is complying with the deal.”
This creates a major problem for team anti-deal. They need evidence that the deal isn’t working and should be undone, but the facts about the deal’s core provisions don’t support that. The result is an endless deluge of spin. Every new piece of information on Iran or the nuclear deal becomes evidence that Iran is evil or cannot be trusted.
Since the deal, there’s been a slew of bad-sounding stories being spun wildly to construct a narrative of a broken nuclear deal and an Obama administration kowtowing to Iran. A few examples:
- An AP story that allegedly showed Iran would “self-inspect” Parchin, a military complex, turned out to be describing standard operating procedure when it came to nuclear inspections.
- A report from German intelligence suggesting Iran was buying nuclear material was hyped as evidence that Iran can’t be trusted. Turns out the report only covered the year 2015 — before the nuclear deal came into effect.
- Claims that Iran had broken the deal by stockpiling too much heavy water ignored the fact that there wasn’t an actual hard cap on heavy water in the Iran deal, and that Iran very quickly shipped out its excess heavy water.
These stories are all highly technical: In order to understand the truth, you need to know a fair amount about how nuclear inspections work or the terms of the nuclear deal. Without that knowledge, it’s easy to see a pattern of Iranian malfeasance and violation of the terms of the deal — which is exactly the story deal critics are trying to tell.
This most recent controversy over the alleged “hostage” payment fits this pattern perfectly. The truth of the situation is highly technical and boring; nobody cares about a 35-year-old international litigation process. And a surface-level look at the facts — the US delivered $400 million in secret cash on the same day Iran released US prisoners — confirms the narrative of the Obama administration making absurd concessions to Iran.
Yet when boring facts meet exciting spin, exciting spin often wins out. So you’ve got Mark Dubowitz, the executive director of the Foundation for the Defense of Democracies and one of the leaders of the effort to torpedo the deal, claiming that the entire $1.7 billion was a big ransom payment.
If you weren’t following this debate very closely, you wouldn’t know why he was wrong. You would conclude that the US has “once again” made embarrassing concessions to Iran — a point that Republicans, deal critics, and Obama opponents are only too happy to amplify.
I’m not trying to say the Iranians are innocent little lambs. Iran is most certainly a very, very bad actor — it is spreading sectarian violence in Iraq (and elsewhere), funding anti-Israel terrorist groups, and devoting tremendous military resources to propping up Bashar al-Assad’s murderous regime in Syria. The nuclear deal hasn’t made Iran into a force for stability, as some deal proponents in the Obama administration hoped, and it probably won’t.
These are real, serious foreign policy problems for the United States. But when our Iran debate focuses on misleading nuclear inspection minutiae or whether the Obama administration is “kowtowing” to Iran with things like the alleged hostage payment, we aren’t having a serious conversation about how to address Iran’s actually bad policies.
Instead, we’re debating an endless drumbeat of misleading stories designed only to undermine the nuclear deal and faith in the Obama administration’s negotiating prowess. The ransom faux scandal is only the latest such story in this pattern.
This isn’t a helpful way of talking about America’s Iran policy, and it needs to stop.
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