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'Wall Street Journal' Reveals U.S. Paid $400 Million In Cash To Iran

AUDIE CORNISH, HOST:

Here's something else that made some waves on the campaign trail. We've been learning more about how far the Obama administration was willing to go to resolve disputes with Iran. When Iran released five Americans from prison in January, the U.S. cleared $1.7 billion in financial claims, and The Wall Street Journal reports that the first installment, $400 million, was sent in cash. NPR's Michele Kelemen has more.

MICHELE KELEMEN, BYLINE: It was a dramatic weekend back in mid-January. A nuclear deal formally took effect, giving Iran some relief from sanctions. Iran released five American prisoners, including Washington Post journalist Jason Rezaian. And now we're learning that the U.S. put $400 million in cash on a plane to Tehran. White House Spokesman Josh Earnest says there is a reason for that.

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JOSH EARNEST: The United States does not have a banking relationship with Iran.

KELEMEN: That money, he says, was part of a settlement that could have been worse for American taxpayers.

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EARNEST: This $400 million is actually money that the Iranians had paid into a U.S. account in 1979 as part of a transaction to procure military equipment.

KELEMEN: The sale never went through because the shah of Iran was overthrown. The U.S. agreed to also pay $1.3 billion in interest. Republican presidential candidate Donald Trump took to Twitter to denounce the deal, calling it a scandal and saying Democrat Hillary Clinton was the one who started the talks to give cash to Iran. Clinton was actually not secretary of state when that was negotiated. The House Foreign Affairs Committee chairman, Republican Ed Royce of California, accused the Obama administration of paying ransom. The White House denies that.

While the Obama administration says all these disputes were negotiated on different tracks, the timing was no coincidence, says Kenneth Katzman, an Iran expert with the Congressional Research Service.

KENNETH KATZMAN: There was I think a decision by the U.S. and Iran to settle these outstanding, irritating issues at once and try to, you know, clear the slate, so to speak.

KELEMEN: The trouble is, since then, Iranian authorities have arrested more Westerners. They're now holding three Iranian-Americans as well as dual nationals from the U.K. and Canada. Karim Sadjadpour of the Carnegie Endowment for International Peace says the U.S. set a precedent back in January.

KARIM SADJADPOUR: The challenge always in dealing with the Iranian regime is that they'll never articulate up front what it is that they're looking for in exchange. Are they looking for cash? Are they looking for the release of their own prisoners? Are they looking for other things?

KELEMEN: There are some hints. Katzman points out that Iran wants to see more sanctions relief.

KATZMAN: The supreme leader mentioned this the other day in a speech, continues to talk about Iran, the Iranian people not feeling the benefits of the sanctions relief. And Iranian officials are linking this to the fact that many international banks remain hesitant to re-engage in Iraq.

KELEMEN: There are also Iranian politics at play. Sadjadpour says the hardliners want to undercut Iran's more moderate president.

SADJADPOUR: The narrative of the Iranian Revolutionary Guard is that there are better bargainers than the Iranian foreign ministry, so the hardliners in Tehran want to show that they can get a lot more in return from the United States than the Iranian diplomats who negotiated the nuclear deal.

KELEMEN: And a plane full of cash plays right into that narrative. It also fires up politicians here who oppose the nuclear deal. Michele Kelemen, NPR News, Washington. Transcript provided by NPR, Copyright NPR.