Newly re-elected Iranian President Hassan Rouhani gestures after delivering a televised speech in the capital Tehran on May 20, 2017. A portrait of Iran’s Supreme Leader Ayatollah Ali Khamenei is seen in the background.ATTA KENARE/AFP/Getty Images
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The Obama Administration’s $1.7 Billion Iranian Deception

It’s time to release the documents regarding the previous president’s payment of the Islamic Republic’s claim

Lee Smith
February 21, 2018
Newly re-elected Iranian President Hassan Rouhani gestures after delivering a televised speech in the capital Tehran on May 20, 2017. A portrait of Iran's Supreme Leader Ayatollah Ali Khamenei is seen in the background.ATTA KENARE/AFP/Getty Images

Over the long President’s Day weekend, the current president complained about the previous one. “Never gotten over the fact that Obama was able to send $1.7 Billion Dollars in CASH to Iran and nobody in Congress, the FBI or Justice called for an investigation!” Donald Trump tweeted.

Wrong, said the Obama White House. That was always Iran’s money. As the Washington Post’s Glenn Kessler tweeted at Trump in response: “Has no one who works for Trump ever explained it was a legal settlement of money the Unites States owed Iran from before the 1979 revolution?”

Kessler is one of the top correspondents in Washington, earning respect on both sides of the aisle. He was Secretary of State Condoleezza Rice’s favorite reporter. He’s covered foreign policy, nuclear-related issues, and has been running the Post’s Fact-Checker blog for several years where he’s shown he’s not afraid to correct his own mistakes when he’s wrong. And he’s wrong here.

Prior to the 1979 Islamic revolution, the government of Iran, then under Shah Mohamed Reza Pahlavi, had put $400 million for military equipment into the Pentagon’s Foreign Military Sales (FMS) account. In 1981, the clerical regime filed a claim at The Hague to have that money returned. The Obama administration contended that the $1.7 billion represented the $400 million plus $1.3 billion in interest. The White House boasted that it had negotiated the sum down from $6 or $7 billion thereby winning the U.S. taxpayer a sweet deal.

The Obama White House omitted several key facts.

First, when Iran submitted its claim in 1981, the US filed an $817 million counterclaim for Iran’s violations of its obligations under the FMS program. As Rick Richman explained in a 2016 Mosaic article, “with both the claim and the counterclaim still pending, it was possible that Iran owed billions of dollars to the U.S., not the reverse.”

Second, a 2000 law signed by President Bill Clinton, the Victims of Trafficking and Violence Protection Act, said that Iran’s FMS account could not be refunded until court judgments held by the U.S. government against Iran for damages from terrorist acts against American citizens were resolved to America’s satisfaction.

American victims of Iranian terrorism had won judgments against the regime in American courts. The problem, as Richman wrote, was collecting. The parent of one young American woman murdered by an Iranian-backed terrorist group during her junior year abroad in Israel discovered the FMS account. The Clinton administration opposed paying out of the FMS account, arguing that the $400 million was U.S., property not Iran’s.

However, as Richman wrote:

Congress and the Clinton administration agreed on legislation directing the U.S. Treasury to pay the American holders of terror judgments against Iran for the amount of their compensatory damages plus 10 percent of their punitive damages, up to the amount in the FMS fund. The law subrogated the United States—meaning that the terror judgments became direct U.S. government claims against Iran to the extent the Treasury had paid them. Finally, the law included a provision to ensure that Iran would ultimately have to bear the cost of those payments: “no funds shall be paid to Iran . . . from the [FMS] fund until such subrogated claims have been dealt with to the satisfaction of the United States.”

In short, Obama ignored the law. Moreover, in releasing those funds to the world’s leading state sponsor of terror, he made American taxpayers cover the damages owed by Iran for its acts of terrorism against American citizens.

That said, Trump doesn’t need an investigation to reveal the facts. In a recent phone call, Richman said Trump should release all the documents regarding the Obama administration’s payment of Iran’s claim, including the computation of the amount of interest allegedly owed, the amount of the U.S. counterclaim not used as an offset, the amount of the court judgments against Iran held by the U.S. under the 2000 statute, plus the amounts of interest on both the counterclaim and the court judgments.

“It’s hard to see why the Treasury Department has kept this information classified,” he said. “CIA director Mike Pompeo was involved in this issue when he was in Congress and knows there are many questions that Congress appropriately asked that have yet to be answered. Why doesn’t the Trump White House just release the documents so we can finally have some clarity.”

Indeed, clarity would be most useful. Glenn Kessler is an experienced and honest reporter—which is to say the issue isn’t simply that he was spun around by the Obama administration’s self-serving, and intentionally inaccurate, version of history, law, and finance. The untruth is dangerous precisely because readers count on the integrity of journalists like Kessler. If the fables and fictions seeded by political operatives are not uprooted, there are only weeds.