State Department unable to identify a historical precedent for $400 million cash payment to Iran

The Obama administration continues to claim nothing unusual happened with the payment of $400 million in cash to Iran, but when the Associated Press asked the State Department to cite a precedent for the transaction the department came up empty:


“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 AP did find a historian who was able to cite a previous instance where the settlement of an international dispute was made in cash. It was the close of the Mexican-American War in 1848:

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 guilt.

The payment of the $15 million had to be made in $3 million installments of gold or silver coins. The point here is that, contrary to what the Obama administration claims, the cash payment to Iran was very, very unusual.


The explanation given by both the State Department and President Obama is that it was not possible to make the initial payment by wire transfer because the United States did not have any direct banking connections with Iran. Earlier this week a reporter for the New York Sun identified the subsequent $1.3 billion interest payment to Iran as coming from something called the Judgment Fund. That money appears to have been wired to Iran just two days after the cash was delivered by plane. Tuesday I pointed to the contentious exchange on this subject during the State Department’s daily briefing:

Today, reporter Matt Lee of the Associated Press asked State Department spokesman Mark Toner about those payments from the Judgment Fund. “These transfers certainly appear to have been made by wire not paid in actual cash,” Lee stated. “If that is the case I’m wondering…why you couldn’t have paid the $400 million in the same way?” Lee asked.

Spokesman Mark Toner replied, “I’m not sure if I can give you a complete answer on that.” He went on to mention the fact that the U.S. did not have a “bank to bank” financial relationship with Iran at the time. Toner said he couldn’t speak to how the payment of interest was made.

Lee pressed the point saying, “But you’re suggesting that there might have been some change in your banking relationship between the 17th of January and the 19th of January that would have allowed this to…the 18th as I recall was a federal holiday.”

Toner replied, “I don’t know” and added, “And we’ve said we’re not going to talk about this.”


Did the U.S. wire the money to a third party who did have a banking relationship with Iran? If so it raises the same question: Why couldn’t the U.S. have done the same thing with the $400 million it paid in cash?

After 7 months of lying about this transaction, it’s difficult to believe anything the administration says about it. So it seems possible the real reason the money was paid in cash is not because we lacked banking connections but something else, something the administration would find embarrassing to admit. Maybe Iran demanded the principal in cash or maybe the U.S. thought cash would be better leverage in the prisoner release, further backing up the idea this was seen as ransom. The only thing that seems certain is that the Obama administration has not been telling the truth.

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