On January 17, a plane carrying three Iranian-Americans, recently freed from prison, left Iran for Switzerland. After it took off, a plane carrying $400 million (Dh1.47 billion) in various currencies (excluding US dollars) left Geneva for Iran. Inevitably, eight months later, Republicans and Democrats in the US are arguing over what it all meant.
Cutting through reams of inaccurate reports and politicised accusations, here are the basics of what happened. Iran had imprisoned several Iranian-Americans in Iran — not for the first or last time. Iran agreed to release four of them, including the three on the January 17 flight, in exchange for American clemency for seven people convicted of or facing charges for violating sanctions against Iran and ending extradition requests for 14 others.
Long before this, in the 1970s, Iran had paid $400 million to the US to buy military items. After the Iranian revolution, the United States refused to deliver weapons or to refund the money. Since 1981, an international tribunal has reviewed US-Iran claims. As it became clear that the US would likely lose the case, and bolstered by diplomatic progress in other areas, Tehran and Washington agreed to settle, with the US paying $1.7 billion — the original amount plus interest. The $400 million was the first instalment and the US State Department recently said the remainder was paid on January 19.
Meanwhile, Iran, the US, and other countries had reached an agreement on a nuclear deal, the Joint Comprehensive Plan of Action (JCPOA), with implementation beginning on January 16.
These three separate strands of negotiation came together in late 2015, allowing movement on a range of issues. This was not unusual in diplomacy, in the sense that technically separate negotiations can mutually advance or undermine each other. However, in the US-Iran relationship, diplomats for both countries not only face the normal challenges of diplomacy, but also must cope with influential spoilers back home who want to derail improvements in the relationship, especially the JCPOA.
On January 17, US President Barack Obama announced the prisoners’ release and the financial settlement, so it was obvious that both happened around the same time. However, US officials insisted that the prisoners and the payment were separate lines of negotiation, while Obama noted that, “With the nuclear deal done, prisoners released, the time was right to resolve this dispute as well.” After some initial criticism from Republicans, the story quieted down.
Then, on August 3, the Wall Street Journal reported that the US had paid the $400 million on the exact same day that the prisoners were released, leading Republicans to renew accusations that the administration had paid “ransom” for “hostages”. The US has long refused to ever pay ransom for US citizens, fearing that doing so would encourage hostage-taking. On August 4, Obama said “we do not pay ransom”.
On August 18, the US State Department acknowledged that officials had delayed the payment for a few hours until they were sure the prisoners were leaving Iran. While insisting that the payment was not ransom, spokesman John Kirby told reporters that the US had kept “maximum leverage” by holding the funds until the prisoners were out. This did not directly contradict previous statements by officials, but it raised questions about whether they had been misleading.
These events presented a classic diplomatic conundrum additionally complicated by problems specific to US politics and the US-Iran relationship. Diplomats and national leaders often face what the Democrat presidential nominee and former secretary of state Hillary Clinton has termed “hard choices”. The reality is that the payment was not ransom; the money belonged to Iran and would have to be paid and the prisoners were released in exchange for the US dropping legal charges against several Iranians, not for the money. Concerned about delays in the Americans’ release, US officials held the money until they knew the prisoners were leaving Iran. It was the prudent thing to do and imagine the tsunami of outrage if US officials had sent the money and then Iran reneged on releasing the prisoners. However, it is also true that the action potentially undermines the no-ransom policy, especially as some Iranian officials reportedly interpreted it as a ransom payment.
These are the types of calculated risks that leaders must take all the time, but the episode also underscored how domestic US politics complicate policy towards Iran. Regardless of how Obama and US officials chose to handle the situation, Republicans would denounce them — especially the many Republicans who opposed the nuclear deal and want to appear tough on Iran. Furthermore, this happened in an election year. Along with other Republicans, the GOP presidential nominee Donald Trump has used the incident to condemn Hillary. In just one example, Trump tweeted: “Our incompetent secretary of state, Hillary Clinton, was the one who started talks to give $400 million, in cash, to Iran. Scandal!” However, the tribunal process started decades before Hillary even became secretary of state and the agreement to settle the claim was reached well after she left the post.
To make things more interesting, Trump said he had seen a video tape of Iranians taking the money off the plane, saying that Iran sent the video to the US “to embarrass us”. However, his own campaign later admitted that he was actually referring to an AP video shown on Fox News that reportedly depicts the plane carrying the prisoners landing in Geneva.
Some Republicans intend to hold congressional hearings on the situation in September, and they will undoubtedly use it to criticise Obama and Hillary, despite her lack of involvement. However, the long-term impact of the debate over whether the US paid ransom probably will be negligible.
Bigger risks lurk. In addition to exemplifying the usual dilemmas of diplomacy and the challenge posed by American and Iranian opponents of the JCPOA, the recent controversy also highlighted the problem of ongoing US financial sanctions against Iran. Many Americans, including Trump, viewed the use of a plane full of cash to make the payment as dodgy, but given that US sanctions prohibit Iran from accessing the US financial system and that Iran’s reconnection to the global Swift (Society for the Worldwide Interbank Financial Telecommunication) system was just starting in January, there were few options.
Iranian officials who support the nuclear deal are increasingly concerned that US financial sanctions (separate from the JCPOA) are blocking investment and the critical economic dividends that would bolster Iranian President Hassan Rouhani and other pragmatists in Iran. While the US State Department has tried to reassure foreign banks that it “will not stand in the way of permitted business activity with Iran”, banks have good reason to feel uncertain about how the US might apply its remaining financial sanctions, given difficulties ensuring full compliance and huge penalties in the past.
Iran and foreign banks have requested guarantees against US prosecution for undertaking business with Iran, but the Obama administration is unlikely to take such steps — which Republicans would loudly condemn — at least until after the election. But Rouhani is running out of time to demonstrate benefits from the JCPOA, and Supreme Leader Ali Khamenei has accused Washington of failing to implement its side of the deal.
In the last year, the US and Iran, aided by other countries, made historic diplomatic progress. That progress would be fragile in the best of circumstances. Given that Iranian and American leaders who support the deal face constant attempts to undermine them at home, it will take a very high level of determination and creativity to maintain the diplomatic momentum.
Kerry Boyd Anderson is a writer and political risk consultant.
