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No, Mike Pence, the US didn't give Iran a $400 million ransom payment

Republican vice presidential candidate Mike Pence speaks during the US vice presidential debate at Longwood University in Farmville, Virginia, on October 4, 2016.
Republican vice presidential candidate Mike Pence speaks during the US vice presidential debate at Longwood University in Farmville, Virginia, on October 4, 2016.
SAUL LOEB/AFP/Getty Images

In Tuesday's vice presidential debate, Donald Trump's running mate Governor Mike Pence claimed that "The day Iran released four Americans we delivered $400 million in cash as a ransom payment for Americans held in Tehran."

But that's wrong. The US did not pay Iran a ransom.

What Pence is referring to is a payment that President Obama announced back in January that was the result of an agreed settlement to a 35-year case in international court. It had nothing to do with any "hostage" payments.

Once you understand these facts, you'll understand that this isn’t about the Obama administration paying a secret ransom to Iran. If anything, it's a story about the way Washington’s debate over Iran is fundamentally broken.

What actually happened with the Iran payments

iran revolution woman
An pro-revolution Iranian woman in Tehran in 1979.
(Kaveh Kazemi/Getty Images)

In very simple terms, this payment is the first installment of a refund for US weapons that Iran purchased but that 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, the United States halted a delivery of fighter jets that Iran’s pre-revolution government had already paid $400 million for. Normally the US would have returned the money if it wasn’t going to deliver the planes, since countries don’t just break formal agreements like that. But the US government had already frozen Iranian assets in the United States 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, the accord 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 IranUnited States Claims Tribunal, functioned as a kind of binding arbitration. To deal with cases, 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 AP’s Matt Lee and Bradley Klapper report, 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 and Klapper write.

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 around the weapons money — some of the latter group 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).

This settlement was announced the same day in January as Iran received its first round of sanctions relief from the Iran deal.

The first $400 million payment, mentioned in the AP report, was the first installment toward the $1.7 billion total. The reason this was being done in installments is that US law prevents the US government from giving Iran dollars, so the government had to scrape together foreign currency. Getting together large amounts of foreign cash is hard— 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?

kerry zarif
John Kerry and Iranian Foreign Minister Mohammad Javad Zarif, diplomacin'.
(Pool/Getty Images)

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 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.

Two recent Wall Street Journal pieces, both by Solomon and Carol Lee, attempted to clarify what actually happened. The core fact uncovered by Solomon and Lee is that the US refused to deliver the first $400 million payment owed under the settlement until it was sure that Iran had upheld its end of the bargain on the prisoner deal.

"US officials wouldn't let Iranians take control of the money until a Swiss Air Force plane carrying three freed Americans departed from Tehran on Jan. 17," Solomon and Lee write. "Once that happened, an Iranian cargo plane was allowed to bring the cash home from a Geneva airport that day."

The AP piece merely broke the news that a State Department spokesperson confirmed Solomon and Lee's basic finding on record. Previously, the administration had denied any link between the prisoner release and the arms deal settlement.

"State Department spokesman John Kirby ... said the U.S. withheld the delivery of the cash as leverage until Iran permitted the Americans to leave the country," the AP's Klepper reports.

This information, however, doesn't amount to evidence of a ransom. Remember, the US had already agreed to pay Iran that money as part of the settlement. The only question was timing.

What happened is that the US chose to postpone the payment it had already promised to make until it was sure Iran was upholding the prisoner release deal. Iran wasn't getting any additional money in exchange for prisoners (it actually got prisoners in exchange for prisoners). The US government just decided it couldn't trust Iran, necessarily, so it withheld following through on the arms deal settlement until it was sure Iran was cooperating on the prisoner deal.

In other words, for the $400 million to actually have counted as a "ransom," the US would have needed to agree to pay Iran $400 million specifically in exchange for the release of its prisoners. But that's not what happened here. Only the timing of the payment was linked to the release.

What's more, 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.

"[It's the] opposite of ransom," writes Matt Duss, the president of the Foundation for Middle East Peace. "Obama got Iran to settle for [a] fraction of money it could've gotten, and got prisoners back as well."

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 they got the money as part of a ransom deal, and thus make the United States look weak.

Indeed, that's what some Iranian officials have done. "Iranian press reports have quoted senior Iranian defense officials describing the cash as a ransom payment," write Solomon and Lee.

Yet it's entirely predictable that Iranian officials would spin this episode as a hostage payment. Doing so makes them look strong to their domestic audience and America look weak. We just shouldn't take Iranian spin at face value — especially when it’s contradicted by independent evidence.

In reality, the Iranians could have made inflated claims about the payment 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.

This 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.

This shows how our Iran debate is broken

Vice President Biden Meets With Jewish Community Leaders In Davie, Florida
An anti-Iran deal protest in Florida.
(Joe Raedle/Getty Images)

There’s a bigger problem here. 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 withheld a payment $400 million in secret cash until 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 people like Mike Pence and Donald Trump 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.


Watch: How the 2015 Iran nuclear deal works

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