FPI Bulletin: U.S. Paid Iran $400 Million Ransom for Hostages

August 4, 2016

Yesterday, The Wall Street Journal confirmed what observers have long suspected: In January, the Obama administration paid Iran a $400 million ransom to secure the release of American hostages. On the same day as the prisoners’ departure from the country, an unmarked U.S. cargo plane carrying stacks of euros, Swiss francs, and other foreign currencies landed in Tehran — funds the Islamist regime subsequently transferred to its military. By capitulating to Iranian blackmail, the White House violated its own pledge to refrain from paying cash for hostages, subsidized the regime’s regional aggression, spurred Tehran to detain more Western captives, and sent Iran the message that it can humiliate the United States with impunity.

The administration now claims that the January payment marked the first installment in a $1.7 billion settlement of a decades-old financial dispute between Washington and Tehran. In the aftermath of the 1979 Islamic Revolution, the Carter administration froze a $400 million trust fund established by the shah to purchase U.S. military equipment, prompting the nascent Islamist regime to file a claim at The Hague. On January 17, President Obama announced the $1.7 billion resolution but failed to mention the $400 million airlift, instead suggesting that the nuclear deal and prisoner exchange generated a positive rapport between the two nations that led to the trust fund settlement. “With the nuclear deal done, prisoners released, the time was right to resolve this dispute as well,” he said.

The Journal’s report contradicts the president’s narrative. In fact, last fall, Washington and Tehran were negotiating the prisoner exchange and trust fund dispute concurrently. Some Justice Department officials opposed the timing of the $400 million payment because it would look like a ransom and the Iranians would consider it as such. Those officials proved correct. Days after the release of the hostages, Iranian General Mohammad Reza Naghdi, commander of the Basij militia, publicly stated, “Taking this much money back was in return for release of the American spies.”

In his January 17 statement, however, President Obama portrayed the trust fund settlement as a diplomatic victory, noting that it amounted to “much less than the amount Iran sought” and saved America “billions of dollars that could have been pursued by Iran.” In a press call minutes later, one senior administration official contended that the resolution constituted “a very positive settlement for us”; another claimed that it “reduced a significant risk of liability.”

The next day, Secretary of State John Kerry proclaimed that the arrangement’s timing was “absolutely a coincidence.” On January 19, White House Press Secretary Josh Earnest called the settlement “a very good deal for taxpayers” and “exhibit A in the administration pursuing tough, principled diplomacy in a way that actually ends up making the American people safer and advancing the interests of the United States more effectively than military actions.” On January 20, Ned Price, spokesman for the White House’s National Security Council, tweeted that with “each passing day we would’ve owed more interest. The sooner we settled, the better.”

The administration’s assertions seemed consistent with official U.S. policy on ransoms. On June 24, 2015, President Obama issued a formal statement “reaffirming that the United States government will not make concessions, such as paying ransom, to terrorist groups holding American hostages.” Paying ransoms, he added, “risks endangering more Americans and funding the very terrorism that we’re trying to stop.”

But the Journal’s account suggests that the Obama administration, against its own better judgment, reversed this policy — and that its predictions of a ransom’s likely outcome proved prophetic. In the months after the settlement, Tehran detained several additional hostages. And in May, Iran announced that its military would use the $1.7 billion to fund part of a 90 percent increase in military spending for the 2016-2017 budget, thereby enabling the regime to expand its hegemonic ambitions throughout the Middle East. Perhaps more troublingly, by paying Iran with cash, the United States effectively rendered the money untraceable, thereby enabling Tehran to transfer the sum to its regional proxies without detection.

In a press briefing yesterday, Earnest denied that the $400 million payment amounted to a ransom, affirmed longstanding U.S. policy opposing such payments, and falsely declared that Iran has used its newly acquired money to improve its economy. Earnest acknowledged, however, that the $400 million shipment occurred, thus confirming the Journal’s story and effectively conceding that the administration had concealed the payment in January. He also failed to offer a credible explanation of the settlement’s suspicious timing, and instead accused critics of bad faith. “I think it’s an indication of just how badly opponents of the Iran deal are struggling to justify their opposition to a successful deal,” he said.

On the contrary, the settlement more likely indicates how badly the Obama administration has struggled to preserve its signature foreign policy achievement. Recognizing that Iran’s incarceration of innocent Americans undermined public support for the nuclear agreement, the White House payed the ransom covertly in an attempt to demonstrate that the accord would lead to tangible achievements in other diplomatic arenas.

In reality, of course, Washington merely emboldened Tehran to increase its aggression. Rather than capitulate to any new Iranian demands for more money, the Obama administration should state publicly that it will not pay any ransom for the hostages that still remain in Iranian prisons. It should also increase sanctions on Iran for its terrorism support, human repression, and ballistic missile tests, and tie any future sanctions relief to meaningful Iranian efforts to curb its misbehavior. In the absence of such steps, the Iranian hostage crisis will endure, public support for the nuclear deal will continue to decline, and a future U.S. administration may harbor fewer compunctions about retaining an accord that emboldens rather than tames a repressive Islamist dictatorship.

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