The recent news about the January 2016 release of 5 prisoners in Iran and its coincidence with the US payment of $400 million to the IR Regime has created a lot of excitement in the anti-Obama and the anti-Nuclear Deal camps. While the US government states that the $400 million is a partial payment of an old debt, the anti-administration crowd believes that it is a ransom that was paid to the Regime to secure the release of the prisoners. Here is the background.

Back in the late 70’s, the late Shah paid the US government $400 million to purchase some fighter jets. When Dr. Bakhtiar was appointed as the prime minister, and in the populous atmosphere of the time, not only he abolished Savak, released the few hundred political prisoners, cut ties with Israel and S. Africa, he also cancelled all military contracts with the US and the $400 million contract was never fulfilled by the Pentagon. After Khomeini came and the mob took over the assets of many American companies in Iran, the US also held on to the billions of Iran’s cash, stock and gold bullions in US banks and institutions. The hostage crisis ensued and both parties accused each other of illegally holding other party’s assets and money.

The Algiers Accord in January 1981ended the hostage crisis. Among the key provisions of the accord was a process to resolve the financial issues between the 2 parties. The Iran US Tribunal was set up in The Hague with 9 judges, (3 Iranians, 3 Americans and 3 independents) to decide and have the final say on all the financial disputes and, half of Iran’s assets were transferred to an escrow account to pay for the claims. So far more than 2,700 cases have been decided and more than $2.5 billion has been paid to the American companies and individuals. In recent years, the case of the $400 million purchase was argued before the Tribunal and a decision was pending. The IR Regime was asking for $10 billion in monetary damages. The US lawyers believed that the Tribunal would rule in favor of the IR for a judgement of around $4 billion and encouraged the US government to pursue a friendly arbitration. The US engaged the Regime and a $1.7 billion agreement was reached; the original $400 million plus $1.3 billion interest accrued over 37 years.

What is not known at this point is the agreed method of payment to the IR and the schedule of payments. What is known however is that the US intended to resolve the dispute per the Tribunal’s decision and pay the $1.7 billion amount, although there were no ways to transfer the money to an Iranian bank until a nuclear deal could be reached, sanctions lifted and the Iranian banks get connected to SWIFT for money transfers. It is also known quite well that the US negotiating team was under tremendous pressure to include the release of the prisoners in the nuclear negotiations. And although all the public attention was directed at the 3 known prisoners, Mr.’s Rezaian, Hekmati and Abedini, it came as a surprise when the names of 2 other prisoners popped up; Mr. Khosravi-Roodsari and Mr. Trevithick.  Mr. Khosravi was rumored to have ties with the US intelligence community and Mr. Trevithick held positions at the American University of Suleimania in Iraq and then Kabul, travelled extensively in the Central Asian countries and spoke Arabic, Dari and Russian. He entered Iran in September of 2015 to attend Dehkhoda Institute (affiliated with Tehran University) to learn Farsi. He was picked up by Sepah on December 6th and taken to Evin for 41 days.

On January 16, 2016, Mr. Trevithick was taken from Evin to the airport and put on a flight out of Iran. Mr. Khosravi was freed but stayed in Iran for a little while and then left. Mr.’s Abedini, Hekmati, Rezaian and his wife and mom however were taken to the airport where they had to wait until the plane with $400 million in cash arrived. Then they were allowed to leave. So was this a ransom for their release?

Not quite. The US government was going to accept the Tribunal’s decision and settle that matter, so the $1.7 billion was going to be paid, especially when you consider that there are additional cases in front of the Tribunal and US’s refusal to pay would’ve created problems for those cases. I also believe that back in January, Rouhani and Zarif had an exaggerated view of the Nuclear Deal and how it will solve all Iran’s economic problems, so they settled for $1.7 billion instead of waiting for the Tribunal’s judgement. Sepah however was left out of the action and more importantly was holding the prisoners. So they needed to be paid, and in cash. So the Regime requested that the 1st installment come in the form of cash which it did.

At the end, you don’t negotiate with your friends. You negotiate with your adversaries, and in the IR Regime’s case, every time you shake hands with them, you go and wash your hands.

The alternative is to bomb the place, which nobody is ready to do. Not yet.