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Little Precident for Iran Cash Payment 08/27 10:03

   A $400 million cash delivery to Iran to repay a decades-old arbitration 
claim may be unprecedented in recent U.S. history, according to legal experts 
and diplomatic historians, raising further questions about a payment timed to 
help free four American prisoners in Iran.

   WASHINGTON (AP) -- A $400 million cash delivery to Iran to repay a 
decades-old arbitration claim may be unprecedented in recent U.S. history, 
according to legal experts and diplomatic historians, raising further questions 
about a payment timed to help free four American prisoners in Iran.

   The money was sent to Iran on Jan. 17, the same day Iran agreed to release 
the prisoners. The Obama administration claimed for months the events were 
separate, but recently acknowledged the cash was used as leverage until the 
Americans were allowed to leave Iran. Only then, did the U.S. allow a plane 
with euros, Swiss francs and other foreign currency loaded on pallets to take 
off in the other direction for Tehran.

   "There's actually not anything particularly unusual about the mechanism for 
this transaction," White House press secretary Josh Earnest said this week of 
the initial cash payment.

   But diplomatic historians and lawyers with expertise in international 
arbitration struggled to find any similar examples.

   Asked to recall a similar payment of the U.S. using cash or hard money to 
settle an international dispute, the office of the State Department historian 
couldn't provide an example.

   The acknowledgement that the prisoners and the payment were linked, and the 
unusual cash delivery, have fueled Republican claims that a "ransom" was paid. 
At a news conference this month, President Barack Obama said cash was used 
because the U.S. and Iran don't have a banking relationship after years of U.S. 
sanctions on Iran, making a check or wire transfer impossible.

   The $400 million was the principal owed by the U.S. on a 1970s Iranian 
account for buying U.S. military equipment. After Iran's 1979 overthrow of the 
U.S.-backed shah and the U.S. Embassy hostage crisis in Tehran, the weapons 
were never delivered. Iran has wanted the money back plus interest ever since. 
Seven months ago, two sides put the matter to rest with a $1.7 billion 

   Alan Henrikson, diplomatic history professor at the Fletcher School of Law 
and Diplomacy, Tufts University, found a precedent by reaching back to the 1848 
Treaty of Guadelupe Hidalgo that ended the Mexican-American War.

   The accord called for the United States to pay Mexico $15 million, an amount 
worth about $482 million in today's money, he said. The payment was determined 
"in consideration of the extension acquired by the boundaries of the United 
States," vague diplomatic wording designed to compensate Mexico for a massive 
loss of territory that included all of California and parts of seven other 
states. At the same time, the Americans avoided any acceptance of national 

   The treaty stipulated that the U.S. immediately pay $3 million --- or nearly 
$100 million in 2016 dollars --- in Mexico City in the form of Mexico's gold or 
silver coin. The remainder had to be paid the same way in $3 million 
installments each year, with the debt subject to a fixed rate of 6 percent 
annual interest. President Ulysses S. Grant would later declare it "conscience 

   "Ambiguity is often needed in diplomacy in order to achieve agreement," 
Henrikson said. "What is important, in my view, is that both sides to a 
negotiation clearly understand, even if only tacitly, what is being agreed upon 
when ambiguity is used. This is not all that subtle, actually. It is life."

   The administration has been ambiguous from the start about its settlement 
seven months ago. Reports by the Wall Street Journal have led to recent 
acknowledgements about the $400 million delivered in stacks of cash and the 
connection to the American prisoners. But officials still won't say how Iran 
received the $1.3 billion in interest.

   It was done "in a fairly above-board way," a senior administration official 
intimately involved in the Iran negotiations said in a conference call last 
week, saying only that the interest payments involved an unidentified, foreign 
central bank. The official wasn't authorized to be quoted by name and demanded 
anonymity. The State Department said Wednesday the payments were made Jan. 19, 
two days after the cash delivery.

   Other settlements with Iran and other foreign claimants in recent decades 
bore some similarities to this latest transaction. But none seemed to involve 
planeloads of cash.

   In 1996, President Bill Clinton reached a settlement with Iran over the U.S. 
Navy's 1988 downing of an Iran Air passenger plane that killed 290 people.

   The arrangement totaled $131.8 million but there was no cash delivery. 
Instead, $61 million was deposited in a Swiss bank account that was jointly 
held by the New York Federal Reserve and the Iranian Central Bank. The money 
was reserved for the families of those killed, not the Iranian government. The 
remainder of the settlement was mainly used to cover Iranian debts to U.S. 
claimants in separate arbitration cases.

   And in 1998, the U.S. settled a dispute with Pakistan after halting the 
delivery of an F-16 aircraft purchase. The compensation was described as $325 
million in cash and $140 million in surplus agricultural commodities, mainly 
wheat and soy, but the precise mechanics of the payment were never spelled out.

   "There were no sanctions regarding dollars or banks in Pakistan, so it may 
have been that the 'cash payment' was a bank transfer," said Marcia Wiss, an 
international lawyer with a private practice in Washington.


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