Arcane $1.7 billion U.S.-Iran deal raises questions, shines light on Judgment Fund


The Obama administration’s $1.7 billion payment to Iran to settle an arcane, decades-old financial dispute is prompting questions among Republican lawmakers trying to piece together the full scope of last weekend’s dramatic U.S.-Iranian prisoner swap and the lifting of many American sanctions on Tehran.

The announcement’s timing, just after confirmation that three Americans left Iranian airspace, is leading to calls for investigations and shedding light on a little-known fund that the president can dip into when he wants to resolve international financial disputes. Legislative efforts are already afoot to curtail that ability.

U.S. officials deny claims that the payment was a bribe to ensure the release of a total of five Americans traded for the freedom of seven people in legal trouble in the U.S. over business deals with Iran.

Sunday’s financial settlement between Washington and Tehran was largely lost amid U.S. elation over the release of the Americans and global interest in the latest benchmark in Iran’s nuclear transformation. With the United Nations’ confirmation that Iran satisfied the terms of last summer’s nuclear agreement, it immediately recouped tens of billions in frozen assets and earned the chance to gain significantly more from suspended oil, trade and financial sanctions.

The much smaller U.S.-Iranian agreement concerned more than $400 million in Iranian money, dating back to before the 1979 Islamic Revolution and the end of diplomatic ties, which the U.S.-backed shah’s government used to buy American military equipment. The Iranians got that money back last weekend and some $1.3 billion in interest.

The administration said the settlement was decided on its merits, with officials arguing that Iran demanded more than $3 billion and, at some points during the talks, much more for an agreement.

Earlier this week, however, one Iranian military commander painted the payment in a different light. Mohammad Reza Naghdi, head of the Basij paramilitary wing of the powerful Revolutionary Guards, said the wiring of the funds was a payoff for letting the Americans go.

U.S. officials insist that’s not true.

“There was no bribe, there was no ransom, there was nothing paid to secure the return of these Americans who were, by the way, not spies,” State Department spokesman Mark Toner responded, referring to the charges that held each of the Americans in Iranian prison for years.

In addition to those who left Sunday on a charter plane for Switzerland — Washington Post reporter Jason Rezaian, former Marine Amir Hekmati and pastor Saeed Abedini — one American was permitted to leave a day earlier while another who was freed from prison opted to stay in Iran. Rezaian returned to the U.S. on the private jet of Post owner Jeff Bezos, the founder of online giant Amazon, the Post reported Friday night.

In exchange for the Americans, the U.S. pardoned or dropped charges against seven Iranian citizens accused of sanctions violations, and gave up on extradition requests for 14 additional people.

In explaining his rationale last weekend, President Barack Obama said the settlement “could save us billions of dollars that could have been pursued by Iran. So there was no benefit to the United States in dragging this out. With the nuclear deal done, prisoners released, the time was right to resolve this dispute as well.”

Obama’s aides have insisted the deal was entirely separate, but U.S. officials acknowledge the claims and prisoner negotiations crossed over at times.

Although the matter surfaced in a number of exchanges over the years, talks on the money only gained speed during the last year or so of contacts between the Americans and Iranians focused on the prisoner swap, officials familiar with the process said. They weren’t authorized to speak publicly on the matter and demanded anonymity.

Lawmakers want more information.

Rep. Mike Pompeo, a Republican from Kansas, is seeking an investigation. The GOP-led House Foreign Affairs Committee has asked congressional researchers to look into the matter. And Sen. Jerry Moran, another Kansas Republican, has introduced legislation in the Senate that would limit Obama’s ability to transfer funds to Iran, which could affect other, lingering financial disagreements between the two countries.

“The United States should not be funding governments that openly violate human rights, proudly disregard U.N. Security Council resolutions and call for the destruction of America and its allies,” Moran said in a statement.

“Rather than incentivize state-sponsored kidnapping,” he said, “the administration should remind the government of Iran that terror and hostage taking are not for-profit enterprises.”

Rep. Ed Royce, a Republican from California and chairman of the House Foreign Affairs Committee, said, “This concession was never raised by the State Department as on the table, which the administration must answer for.”

To make the payment, the administration returned the $400 million balance from the Iranian account once used for military purchases.

The rest of the money came from an account administered by the Treasury Department for settling litigation claims. The so-called Judgment Fund is taxpayer money Congress has permanently approved in the event it’s needed, allowing the president to bypass direct congressional approval to make a settlement. The U.S. previously paid out $278 million in Iran-related claims by using the fund in 1991.