WASHINGTON, Aug. 3, 2016 — Republican outrage over revelations of a secret cash payment to Iran and Democratic efforts to shrug off the situation demonstrate deepening divisions between the parties in this election year.
At the center of the latest struggle is a revelation that the Obama administration delivered $400 million to Iran on the same day the country released four American prisoners.
The story first broke in January 2016, when the prisoners were released. At that time, the administration announced it would pay Iran $1.7 billion to settle a dispute from the 1970s. Republican members of Congress accused Obama of paying a ransom for the prisoners, including an immediate $400 million cash payment, which arrived the same day Iran released the prisoners.
Lawmakers also used the incident to question Obama’s ability to access a presidential discretionary fund allocated for resolving international financial disputes.
The situation became inflamed in late January when a powerful member of the Iranian Revolutionary Guard told the press that the payment was in exchange for releasing the prisoners.
The Obama administration flatly denied the allegations. Instead, it said that the payment was the third part of negotiations with Iran, which it had reported on consistently. Specifically, President Obama negotiated the highly publicized Iran nuclear deal, as well as the release of American hostages and resolved a financial dispute concerning money frozen in U.S. bank accounts.
The issue died down until today, when the Wall Street Journal ran a story and Republican presidential nominee Donald Trump tweeted about the issue.
Our incompetent Secretary of State, Hillary Clinton, was the one who started talks to give 400 million dollars, in cash, to Iran. Scandal!
— Donald J. Trump (@realDonaldTrump) August 3, 2016
The Wall Street Journal story included additional details on the transfer, further inciting Iran opponents and members of Congress who believe the administration intentionally withheld details from them.
The WSJ explained that, because the United States and Iran did not have a banking relationship, the administration sent pallets of cash, including euros, Swiss francs, and other hard currencies, to Tehran on a cargo plane. The description of shrink-wrapped piles of currency reinforced the view that the transfer was not simply business as usual, instead conjuring visuals of a covert deal and stoking the belief that something sinister was behind the payment.
The financial dispute between Iran and the United States dates back to the overthrow of the shah and the deterioration of U.S.-Iran relations in 1979 after the Ayatollah Khomeini took power. Before the overthrow, Iran purchased weapons from the United States and sent funds to cover that purchase.
The U.S. did not deliver the weapons after the overthrow, nor did it return the money sent by the shah. Iran took the case to the International Court of Justice, arguing that the United States had illegally kept Iran’s money. Tehran demanded the return of the original principal plus interest.
That, says the Obama administration, was the reason for the cash transfer.
Although it is unlikely that the $400 million was an actual ransom for the release of the American prisoners, the timing of the payment strongly suggests the two were related. Most likely, the United States was willing to provide some demonstration of “good will” to Iran toward the overall negotiations. That good will translates roughly to releasing funds to coincide with freeing prisoners.
Unfreezing the money also likely provided Iranian President Rouhani with some leverage over hard-liners opposed to negotiations with the United States, at least temporarily.
For its part, Iran likely saw freeing the Americans as providing proof that it would keep its promises. Up to that point, there was widespread concern that Iran would agree to free Americans, but would backtrack at the last minute.
That would have thrown nuclear talks into complete disarray, making trust between the two sides impossible.
However, skeptics of the Iranian negotiations will remain unconvinced about Iran’s reliability by a prisoner release, especially one sweetened with an immediate $400 million cash payment followed by another payment of more than $1 billion.
Politically, the latest exchange previews the nasty pre-election fight simmering between Republican nominee Donald Trump and Democratic nominee Hillary Clinton. For the next 96 days, nothing is off limits, and if it is possible to make something a campaign issue, both sides will.
Pallets of cash flying to Iran makes a good story and an even better campaign headline.