US-Iran Financial Settlement Controversy

January 17, 2016

On January 17, Secretary of State John Kerry announced that the United States and Iran resolved a long-standing financial dispute dating back to 1981. Iran was to receive the balance of $400 million from a trust fund used to purchase military equipment from the United States before the break in diplomatic relations. In addition, Iran was also to receive roughly $1.3 billion in interest.

In August 2016, new information about how the U.S. paid the settlement’s first installment sparked a controversy. The Wall Street Journal reported that the Obama administration secretly organized an airlift of $400 million in euros, Swiss francs and other currencies that coincided with the January U.S.-Iran prisoner swap. Several Republican lawmakers argued that the payment amounted to a ransom paid by the Obama administration for the American prisoners. The White House and the State Department, however, dismissed the charges. “We do not pay ransom.  We didn't here.  And we don't -- we won’t in the future -- precisely because if we did, then we would start encouraging Americans to be targeted,” said President Obama. “We believe this agreement for the $400 million that was paid in interest and settlement of the case actually saved the American taxpayer potentially billions of dollars,” said Secretary Kerry. 

On August 8, the head of Iran’s National Security Council, Ali Shamkhani, confirmed that the transfer “was related to sale of military equipment to Iran prior to the revolution and had nothing to do with the nuclear deal,” he told state media

The State Department later acknowledged that the United States held onto the $400 million until the American prisoners had taken off in a plane and were safely away from Iran. “We deliberately leveraged that moment to finalize these outstanding issues nearly simultaneously,” State Department spokesman John Kirby said on August 18.

Kerry’s January announcement about the settlement terms is below, followed by more recent Congressional reaction and responses from the Obama administration. 


Hague Claims Tribunal Settlement

Secretary of State John Kerry
The United States and Iran today have settled a long outstanding claim at the Iran-U.S. Claims Tribunal in the Hague.
This specific claim was in the amount of a $400 million Trust Fund used by Iran to purchase military equipment from the United States prior to the break in diplomatic ties.  In 1981, with the reaching of the Algiers Accords and the creation of the Iran-U.S. Claims Tribunal, Iran filed a claim for these funds, tying them up in litigation at the Tribunal.
This is the latest of a series of important settlements reached over the past 35 years at the Hague Tribunal.  In constructive bilateral discussions, we arrived at a fair settlement to this claim, which due to litigation risk, remains in the best interests of the United States.
Iran will receive the balance of $400 million in the Trust Fund, as well as a roughly $1.3 billion compromise on the interest.  Iran’s recovery was fixed at a reasonable rate of interest and therefore Iran is unable to pursue a bigger Tribunal award against us, preventing U.S. taxpayers from being obligated to a larger amount of money.
All of the approximately 4,700 private U.S. claims filed against the Government of Iran at the Tribunal were resolved during the first 20 years of the Tribunal, resulting in payments of more than $2.5 billion in awards to U.S. nationals and companies through that process.
There are still outstanding Tribunal claims, mostly by Iran against the U.S.   We will continue efforts to address these claims appropriately.
—Jan. 17, 2016


House Speaker Paul Ryan (R-WI)

“If true, this report confirms our longstanding suspicion that the administration paid a ransom in exchange for Americans unjustly detained in Iran. It would also mark another chapter in the ongoing saga of misleading the American people to sell this dangerous nuclear deal. Yet again, the public deserves an explanation of the lengths this administration went to in order to accommodate the world's leading state sponsor of terrorism.”

—Aug. 3, 2016, in a statement


House Majority Leader Kevin McCarthy (R-CA)

“America has had a longstanding policy to not reward terrorists and kidnappers with cash.”

“Bad behavior should be punished, not subsidized,”

“But President Obama and his Iranian negotiating team threw that out the window when they stacked $400 million of euros and Swiss francs onto wooden pallets, stuck those wooden pallets in an unmarked cargo plane, and flew those stacks of cash off to Iran.”

—Aug. 3, 2016, according to Roll Call


Chairman of the Senate Committee on Armed Services John McCain (R-AZ)

“The Obama Administration’s airlift of $400 million in cash to Iran is disturbing, but hardly surprising given its long record of concessions to America’s adversaries. Whatever the Administration may claim, it is clear that this payment was a ransom for Americans held hostage in Iran.

“Just like the Administration’s reckless nuclear deal, this cash payment incentivized further belligerent Iranian behavior, such as the arrests of two more Iranian-Americans. It also added $400 million to the coffers of the world’s number-one state sponsor of terrorism at a time when it is actively working to destabilize the Middle East and undermine U.S. national security interests.

“Money is fungible. The Iranian regime now has an additional $400 million to support Bashar Assad’s slaughter of people in Syria; to fund militias and terrorists in places like Iraq and Yemen; to funnel arms to terrorist groups like Hamas and Hezbollah that seek to destroy the state of Israel, and to buy advanced military capabilities to threaten the United States and our regional partners. This is all thanks to the Obama Administration’s reckless and foolish efforts to curry favor with our enemies in Iran.”

—Aug. 3, 2016, in a statement


House Foreign Affairs Committee Chairman Ed Royce (R-CA)

“The logistics of this payment -- literally delivering a plane full of cash to evade U.S. law -- shows yet again the extraordinary lengths the Obama administration will go to accommodate Iran, all while hiding the facts from Congress and the American people.”

“Hundreds of millions in the pockets of a terrorist regime means a more dangerous region, period. And paying ransom only puts more American lives in jeopardy.”

—Aug. 3, 2016, according to Fox News


House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT)

“The timing of the first installment of the settlement agreement with Iran creates the appearance that the money was in fact tied to releasing the American hostages… According to The Wall Street Journal, an Iranian news site close to the Revolutionary Guard, the Tasnim agency, reported that the cash arrived in Tehran on the same day the Americans departed—January 16, 2016.” 

“President Obama did not mention the $400 million cash delivery during his January 17, 2016 address. The Administration asserted the timing of the cash payment and the hostage release are coincidental, and are not the result of any quid pro quo.”  

“The Committee is seeking information about the terms and conditions of the Administration’s agreement with the Islamic Republic of Iran, among other things related to the Iran nuclear deal. We look forward to your appearance before the Committee to answer questions at a future hearing.”

—Aug. 3, 2016, in a letter to Secretary Kerry


Senator Mark Kirk (R-IL)

We were right in January 2016 to describe the Administration’s $1.7 billion transfer to Iran as a ransom payment. Paying ransom to kidnappers puts Americans even more at risk. While Americans were relieved by Iran’s overdue release of illegally imprisoned American hostages, the White House’s policy of appeasement has led Iran to illegally seize more American hostages, including Siamak Namazi, his father Baquer Namazi, and Reza Shahini.”

—Aug. 2, 2016, in a statement


Senator Ted Cruz (R-TX)

“The revelation that the Obama administration ransomed the three Americans being unjustly detained by the Islamic Republic of Iran with $400 million in cash is only the most recent piece of evidence that the so-called nuclear deal with the mullahs is fundamentally illegitimate. It is nothing but a series of bribes and secret agreements that will do nothing to prevent Iran from reaching nuclear capability, yet will provide funding for their sponsorship of terrorism and encourage them to detain more of our citizens.  This ‘deal’ should be ripped to shreds immediately before more damage is done.” 

—Aug. 3, 2016, in a statement


Senator Marco Rubio (R-FL)

“Iran is the world’s foremost state sponsor of terrorism. It is disgusting that the Obama Administration would even contemplate providing almost $2 billion to a terrorist-sponsoring regime as an illicit ransom payment. As the Administration has stated in its own hostage policy, paying hostage-takers endangers American citizens. 
“When the Senate returns in September, I plan to introduce legislation requiring the President to get this money back from Iran and banning any future ransom payments by the U.S. government to countries or groups that take Americans hostage. The President’s actions are unacceptable and come as the Iranians continue to refuse to work with us to locate Floridian Robert Levinson, the longest-held hostage in American history, who was last seen on Iran’s Kish Island in 2007. Iran has pocketed this money and continued to hold and take more Americans hostage. President Obama’s actions have endangered all Americans abroad.
“The American people do not believe the story that the Obama Administration conducted two separate negotiations that were unrelated. That is just unbelievable and disingenuous. It is also contrary to Iran’s statements. For instance, an Iranian military commander said, ‘Taking this money back was in return for the release of the American spies.’ It is a sad day when Iranian officials appear to be more honest than our own president, who owes the American people a better explanation than the outright lies that he and his Administration have told thus far.”

—Aug. 3, 2016, in a statement


Senator Kelly Ayotte (R-NH)

“It is outrageous that the Obama administration covertly shipped a $400 million cash ransom payment to Iran on the day Americans were released by Tehran, purposely hid the details from Congress, and deliberately used bulk foreign currency cash transfers to evade the effects of US financial sanctions. This secret exchange demonstrates once again the fundamental flaws of the Iran agreement and the dangerous lengths this administration has been willing to go to in order to placate the world's worst state sponsor of terrorism. Following the administration's reckless actions, it should come as no surprise that Tehran is now interested in unjustly arresting additional Americans in order to get more cash to support its goals-including funding the terrorist organization Hezbollah, the murderous Assad regime, and their own dangerous ballistic missile program.”

—Aug. 3, 2016, in a statement


Chairman of the Senate Judiciary Committee Chuck Grassley (R-IA)

These reports are particularly troubling in light of the Department’s continuing failure to cooperate with my inquiry into the FBI’s alleged role in facilitating ransom payments to terrorist groups.   Between the current reports of this $400 million payment to Iran and the previous reports that the FBI helped send substantial ransom payments to al Qaeda, there are serious questions about this administration’s policies regarding paying ransoms to terrorists and state-sponsors of terrorism.  As Chairman of the Judiciary Committee, which has oversight authority over the Justice Department, it is my duty to get the facts. 

Accordingly, I am writing to request additional information about the Department of Justice’s role in this transfer of cash to Iran.

—Aug. 5, 2016, in a letter to Attorney General Loretta Lynch

Senator James Lankford (R-OK)

“President Obama’s…payment to Iran in January, which we now know will fund Iran’s military expansion, is an appalling example of executive branch governance,” 

“Subsidizing Iran’s military is perhaps the worst use of taxpayer dollars ever by an American president.”

—Aug. 3, 2016, according to The Wall Street Journal


Senator Tom Cotton (R-AR)

“This report makes plain what the Administration can no longer deny: this was a ransom payment to Iran for U.S. hostages.”

“As you are intimately aware, Iran has a history of illegally detaining U.S. persons as hostages, and it has shown a continued propensity to seize such hostages. Iran is the top state sponsor of terrorism in the world and a destabilizing force throughout the Middle East. Iran has also persistently pursued illicit weapons technology, from ballistic missiles to nuclear weapons capability. I am afraid that the cash payment of a $400 million ransom to the ayatollahs makes all of these problems exponentially worse.”

—Aug. 3, 2016, in a letter to Secretary of State John Kerry and Treasury Secretary Jack Lew


Rep. Lee Zeldin (R-NY)

“Paying a $400 million cash ransom to the world’s largest state sponsor of terror, shows that yet again the Obama administration will go to great lengths, at any and all costs, to appease Iran and show weakness to our enemies. This ransom has already proven to result in the consequences of why America shouldn't have agreed to this payment in the first place. Iran has started imprisoning multiple Iranian-Americans again as well as foreigners from other nations, which are America's allies. When deals like this are cut, one has to truly wonder whether the President has no idea what he is doing, or if he knows exactly what he is doing and is playing for some other team. Unfortunately, paying a $400 million ransom is no game and the consequences are grave.”

—Aug. 3, 2016, in a statement


President Barack Obama

“It’s been interesting to watch this story surface.  Some of you may recall we announced these payments in January -- many months ago.  There wasn’t a secret.  We announced them to all of you.  Josh did a briefing on them.  This wasn’t some nefarious deal.  And at the time we explained that Iran had pressed a claim before an international tribunal about them recovering money of theirs that we had frozen; that, as a consequence of its working its way through the international tribunal, it was the assessment of our lawyers that we were now at a point where there was significant litigation risk and we could end up costing ourselves billions of dollars.  It was their advice and suggestion that we settle.  And that's what these payments represent.  And it wasn’t a secret.  We were completely open with everybody about it.  And it’s interesting to me how suddenly this became a story again.  That's point number one.

“Point number two, we do not pay ransom for hostages.  We've got a number of Americans being held all around the world.  And I meet with their families, and it is heartbreaking.  And we have stood up an entire section of interagency experts who devote all their time to working with these families to get these Americans out. 

“But those families know that we have a policy that we don't pay ransom.  And the notion that we would somehow start now in this high-profile way and announce it to the world -- even as we're looking into the faces of other hostage families whose loved ones are being held hostage and say to them that we don't pay ransom -- defies logic.  So that's point number two. 

“We do not pay ransom.  We didn't here.  And we don't -- we won’t in the future -- precisely because if we did, then we would start encouraging Americans to be targeted, much in the same way that some countries that do pay ransom end up having a lot more of their citizens being taken by various groups.

“Point number three is that the timing of this was, in fact, dictated by the fact that as a consequence of us negotiating around the nuclear deal, we actually had diplomatic negotiations and conversations with Iran for the first time in several decades.  So the issue is not so much that it was a coincidence as it is that we were able to have a direction discussion.

“John Kerry could meet with the foreign minister, which meant that our ability to clear accounts on a number of different issues at the same time converged.  And it was important for us to take advantage of that opportunity both to deal with this litigation risk that had been raised -- it was important for us to make sure that we finished the job on the Iran nuclear deal -- and since we were in a conversation with them, it was important for us to be able to push them hard in getting these Americans out.

“And let me make a final point on this.  It's now been well over a year since the agreement with Iran to stop its nuclear program was signed.  And by all accounts, it has worked exactly the way we said it was going to work.  You will recall that there were all these horror stories about how Iran was going to cheat, and this wasn't going to work, and Iran was going to get $150 billion to finance terrorism and all these kinds of scenarios. And none of them have come to pass. 

“And it's not just the assessment of our intelligence community.  It's the assessment of the Israeli military and intelligence community -- the country that was most opposed to this deal -- that acknowledges this has been a game-changer, and that Iran has abided by the deal, and that they no longer have the sort of short-term breakout capacity that would allow them to develop nuclear weapons.

“So what I'm interested in is, if there's some news to be made, why not have some of these folks who were predicting disaster say, you know what, this thing actually worked?  Now that would be a shock.  (Laughter.)  That would be impressive, if some of these folks who had said the sky is falling suddenly said, you know what, we were wrong and we are glad that Iran no longer has the capacity to break out in short term and develop a nuclear weapon.  But, of course, that wasn't going to happen.

“Instead, what we have is the manufacturing of outrage in a story that we disclosed in January.  And the only bit of news that is relevant on this is the fact that we paid cash -- which brings me to my last point.  The reason that we had to give them cash is precisely because we are so strict in maintaining sanctions and we do not have a banking relationship with Iran that we couldn't send them a check and we could not wire the money.

“And it is not at all clear to me why it is that cash, as opposed to a check or a wire transfer, has made this into a new story.  Maybe because it kind of feels like some spy novel or some crime novel because cash was exchanged.  The reason cash was exchanged is because we don't have a banking relationship with Iran -- which is precisely part of the pressure that we're able to apply to them so that they would ship a whole bunch of nuclear material out and close down a bunch of facilities that, as I remember, two years ago, three years ago, five years ago, was people's top fear and priority that we make sure Iran doesn't have breakout nuclear capacity.  They don't.  This worked.”

—Aug. 4, 2016, during a press conference


Secretary of State John Kerry

“The United States does not pay ransoms.”

“We believe this agreement for the $400 million that was paid in interest and settlement of the case actually saved the American taxpayer potentially billions of dollars.”

“There was no benefit to the United States of America to drag this out. It would have worked against the interests of our taxpayers and with the nuclear deal done, the prisoners released, the time was right to take advantage of that and resolve the dispute in the way that it was resolved.”

—Aug. 4, 2016, during a news conference


White House Press Secretary Josh Earnest

“The first [act] is, this $400 million is actually money that the Iranians had paid into a U.S. account in 1979 as part of a transaction to procure military equipment.  That military equipment, as it relates to this $400 million, was not provided to the Iranians in 1979 because the Shah of Iran was overthrown.  So that was the right decision.  It's also why it was hard for the United States to make an argument in this case that we could just keep the money.  So what the United States did was resolve a longstanding claim at The Hague that saved the American people potentially billions of dollars.

“Now, as it relates to the details, the fact of the matter is the United States does not have a banking relationship with Iran.  And the reason for that is that the administration -- the Obama administration -- has kept in place tough financial sanctions against Iran because of a variety of concerns that we have about their behavior, including their support for terrorism, their violation of human rights, and a ballistic missile program that they maintain that continues to be inconsistent with U.N. Security Council regulations -- resolutions.  

“So the facts of this are quite clear.  And again, 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 that has prevented and continues to prevent Iran from developing a nuclear weapon.”

“There was a conscious, strategic decision that was made on the part of the Obama administration as we were implementing the deal to prevent Iran from obtaining a nuclear weapon to resolve other longstanding concerns that we had with Iran.  And that included securing the release of five American citizens who had been unjustly detained in Iran and closing out a longstanding financial dispute in a way that saved the American people potentially billions of dollars.  

“So this all came to a head at the same time because we were addressing and resolving longstanding concerns with Iranian behavior.  And the benefits are almost too long to mention, but the highlights are:  Iran is not developing a nuclear weapon; Iran has had to scale back significant aspects of their nuclear program; Iran released five Americans who were unjustly detained on Iranian soil; and we resolved a 35-year-old financial claim with the Iranians in a way that saved Americans potentially billions of dollars.  There are many other benefits we can get into as well, but those are the highlights.”

—Aug. 3, 2016, to the press

Question: Was the President aware that senior Justice Department officials at that time were objecting to the sending of cash at the same time as the four imprisoned Americans were to be released?

MR. EARNEST:  I think you won't be surprised to hear that I'm not going to get into a lot of the discussions.  But what I can tell you is that the President, of course, discussed these arrangements with members of his national security team and there was unanimous agreement among his national security team that he should move forward because of the many benefits that I've just described in terms of preventing them from obtaining a nuclear weapon, in terms of rolling back key aspects of their nuclear program, in terms of reaching a financial settlement that saved American citizens potentially billions of dollars, and in terms of securing the release of Americans who had been unjustly detained in Iran.

And I think there is an on-the-record statement from the President’s Attorney General indicating her strong support for moving forward with this arrangement.

—Aug. 22, 2016, to the press


State Department Spokesperson John Kirby

“As we’ve made clear, the negotiations over the settlement of an outstanding claim…were completely separate from the discussions about returning our American citizens home.”

“Not only were the two negotiations separate, they were conducted by different teams on each side, including, in the case of The Hague claims, by technical experts involved in these negotiations for many years.”

—Aug. 3, 2016, to the press


“We were able to conclude multiple strands of diplomacy within a 24-hour period – and oh, by the way, you can go back and look at your own work that was done back then, and you’ll see that we were completely above board about this. Even the President himself talked about the timing. We were able to conclude multiple strands of diplomacy within a 24-hour period, including implementation of the nuclear deal, the prisoner talks, and the settlement of an outstanding Hague Tribunal claim which saved American taxpayers potentially billions of dollars.

“As we said at the time, we deliberately leveraged that moment to finalize these outstanding issues nearly simultaneously. It’s already publicly known that we returned to Iran its $400 million in that same time period as part of The Hague settlement agreement. With concerns that Iran may renege on the prisoner release given unnecessary delays regarding persons in Iran who could not be located as well as, to be quite honest, mutual mistrust between Iran and the United States, we, of course, sought to retain maximum leverage until after American citizens were released. That was our top priority.”

—Aug. 18, 2016, to the press