Obama administration denies Iran cash payment was a ransom

WASHINGTON (Reuters) - The Obama administration said on Wednesday that $400 million in cash paid to Iran soon after the release of five Americans detained by Tehran was not ransom as some Republicans have charged.

The five, including Washington Post reporter Jason Rezaian, were released on Jan. 16 in exchange for seven Iranians held in the United States for sanctions violations. The prisoner deal coincided with the lifting of international sanctions against Tehran.

At the time, the United States said it had settled a longstanding Iranian claim at the Iran-U.S. Claims Tribunal in The Hague, releasing $400 million in funds frozen since 1981, plus $1.3 billion in interest that was owed to Iran.

The funds were part of a trust fund Iran used before its 1979 Islamic Revolution to buy U.S. military equipment that was tied up for decades in litigation at the tribunal.

Representative Jason Chaffetz, chairman of the House of Representatives Committee on Oversight and Government Reform, on Wednesday sent a letter to Secretary of State John Kerry asking him to appear at a future committee hearing to discuss the payment.

White House spokesman Josh Earnest rejected suggestions the money transfer to Iran was ransom or a secret.

   "The United States, under President Obama, has not paid a ransom to secure the release of Americans unjustly detained in Iran and we're not going to pay a ransom," he said in response to a Wall Street Journal article that said Washington secretly organized the cash airlift.

    Earnest said Republicans, who have long opposed the Iran nuclear deal, are seizing on how the money was paid to Iran as a way to undermine the deal. "They're struggling to justify their opposition to our engagement with Iran," he told a briefing.

While there have long been questions about the timing of the payment, one Iranian concern was that the Obama administration could face too much domestic political criticism if it delayed acting on the tribunal's decision.

Due to international sanctions against Iran, the payment, made in euros, Swiss francs and other currencies, had to be made in cash, U.S. officials argue.

One U.S. official said the $1.3 billion in interest was paid to Iran through the U.S. Treasury-administered Judgment Fund, which is used to pay awards against the United States.

Senior officials at the Justice Department had objected to sending cash on a plane to Iran at the same time that Iran was releasing four imprisoned Americans (the fifth American was released separately) but were overruled by the State Department, The Wall Street Journal reported in a separate story on Wednesday, citing people familiar with the discussions.

“People knew what it was going to look like, and there was concern the Iranians probably did consider it a ransom payment," the newspaper quoted one of the people as saying.

Justice Department prosecutors were also concerned that the United States would release too many Iranian convicts and drop too many pending criminal cases against people suspected of violating sanctions laws, the second Wall Street Journal report said.

Reuters was unable to independently verify the report.

In response to the report, a Department of Justice spokesman said in a statement: “The Department of Justice fully supported the ultimate outcome of the Administration’s resolution of several issues with Iran, including Hague settlement efforts, as well as the return of U.S. citizens detained in Iran. We will not comment further on internal interagency deliberations.”

A senior State Department official also responded by saying that the payment had been fully an interagency decision and that any idea that the State Department had the power to overrule was false.

Republican presidential nominee Donald Trump blamed his Democratic opponent, Hillary Clinton, who was secretary of state during Obama's first term, for launching the talks with Iran.

"Our incompetent Secretary of State, Hillary Clinton, was the one who started talks to give 400 million dollars, in cash, to Iran. Scandal!" Trump said in a Twitter post.

The chairman of the Republican National Committee, Reince Priebus, also weighed in. "The Obama-Clinton foreign policy not only means cutting a dangerous nuclear deal with the world's number one state sponsor of terrorism, it also means paying them a secret ransom with cargo planes full of cash," he said.

House Speaker Paul Ryan was more measured, saying, "If true, this report confirms our longstanding suspicion that the administration paid a ransom in exchange for Americans unjustly detained in Iran."

(Additional reporting by Doina Chiacu, Susan Heavey, Patricia Zengerle and Julia Harte; Editing by John Walcott and Leslie Adler)