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WASHINGTON – Obama administration officials told Congress on Thursday that Iran wanted "immediate access" to $1.7 billion paid by the United States in cash to settle a decades-old arbitration claim between the two countries.
At a hearing called by House Republicans, officials from the departments of Treasury, State and Justice defended the payment and its cash delivery. An initial $400 million was delivered Jan. 17, the same day Tehran agreed to release four American prisoners, and the Republicans are calling it a ransom.
Christopher Backemeyer, a deputy assistant secretary of state for Iranian affairs, said Iran wanted immediate access to the money, but he said he wasn't aware whether Iran had asked for cash. He said it was his understanding that the money is going to "critical economic needs" in Iran.
GOP Rep. Sean Duffy of Wisconsin, chairman of the House Financial Services subcommittee on oversight and investigation, said the evidence presented made it difficult to believe the payment wasn't a ransom. He asked the witnesses if they could guarantee that the money will not fund terrorism.
"I can't speak for every dollar that goes in and out of Iran, as you know," Backemeyer said.
The administration had claimed the payment and the prisoner release were separate, but recently acknowledged the cash was used as leverage until the Americans were allowed to leave Iran. The remaining $1.3 billion represented estimated interest on the Iranian cash the U.S. had held since the 1970s as payment for a never-completed military equipment sale.
The hearing was the first of several planned by Republicans who have opposed last year's international accord to limit Iran's nuclear program in exchange for sanctions relief.
Rep. Jeb Hensarling, chairman of the full committee, said the witnesses only agreed to appear after the committee had threatened a subpoena. He pressed the officials on why the payment had to be made in cash and whether it was legal to make a cash payment.
Hensarling, R-Texas, said the payment could "put a price on the head of every tourist, soldier, airman and marine who serves or visits overseas."
U.S. officials have maintained that cash was necessary because of U.S. and international sanctions that have isolated Iran from the international finance system.
Lisa Grosh, a legal adviser for the State Department's Office of International Claims and Investment Disputes, said Iran was having "serious banking problems" as a result of the sanctions.
The Jan. 17 agreement involved the return of the $400 million, plus the additional $1.3 billion in interest. Administration officials have described those terms as favorable compared to what might have been expected from a tribunal set up in The Hague, Netherlands, to rule on claims between the two countries. U.S. officials have said they expected an imminent ruling on the claim and settled with Tehran instead.
The payment "was the best way to avoid a possible decision from the tribunal ordering us to pay a lot more," Grosh said.
Democrats said the hearing was purely political.
"It sounds like my friends in the other side of the aisle would have preferred we pay the money and not get the hostages back," said Rep. Michael Capuano, D-Mass.
Paul Ahern, the assistant general counsel for enforcement and intelligence at the Treasury Department, said the $400 million came from a fund called the Foreign Military Sales Trust Fund. He said they had the money transferred to a European bank, where the money was converted to foreign currency.
The $1.3 billion came from a fund administered by the Treasury Department for settling litigation claims. The Judgment Fund is taxpayer money that Congress has permanently approved in the event it's needed, allowing the president to bypass direct congressional approval to make a settlement. The U.S. previously paid out $278 million in Iran-related claims by using the fund in 1991.
Cash was "the most reliable way to make sure they got the payment in a timely manner," Ahern said.
Republicans noted that it is unusual to make a payment in cash to another country and that it seemed as though the administration was trying to hide it.
Iran "wanted the cash because they are trying to fund terror," asserted GOP Rep. Ed Royce of California, a committee member who also leads the House Foreign Affairs Committee.
That committee is expected to vote next week of his legislation that would prohibit cash payments to Iran and demand transparency on future settlements. Republican senators have endorsed similar legislation that would bar payments from the Judgment Fund to Iran until Tehran pays the nearly $55.6 billion that U.S. courts have judged that it owes to American victims of Iranian terrorism.