U.S. Payment of $1.7 Billion to Iran Made Entirely in Cash

WASHINGTON (AP) — The Obama administration is acknowledging its transfer of $1.7 billion to Iran earlier this year was made entirely in cash, using non-U.S. currency, as Republican critics of the transaction continued to denounce the payments.

Treasury Department spokeswoman Dawn Selak said in a statement late Tuesday that the cash payments were necessary because of the "effectiveness of U.S. and international sanctions," which isolated Iran from the international finance system.

The $1.7 billion was the settlement of a decades-old arbitration claim between the U.S. and Iran. An initial $400 million of euros, Swiss francs and other foreign currency was delivered on pallets Jan. 17, the same day Tehran agreed to release four American prisoners.

U.S. President Barack Obama speaks at the Lao National Cultural Hall in Vientiane, Laos, Tuesday, Sept. 6, 2016. (AP Photo/Carolyn Kaster)

The Obama administration had claimed the events 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. The administration had previously declined to say if the interest was delivered to Iran in physical cash, as with the principal, or via a more regular banking mechanism.

Earlier Tuesday, officials from the State, Justice and Treasury departments held a closed-door briefing for congressional staff on the payments, according to a Capitol Hill aide familiar with the session. The officials said the $1.3 billion was paid in cash on Jan. 22 and Feb. 5. The aide was not authorized to speak publicly and requested anonymity.

The money came from a little-known fund administered by the Treasury Department for settling litigation claims. The so-called Judgment Fund is taxpayer money 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.

Republicans have decried the payments as ransom, a charge the Obama administration has rejected. On Tuesday, a group of Republican senators announced their support for 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.

"President Obama's disastrous nuclear deal with Iran was sweetened with an illicit ransom payment and billions of dollars for the world's foremost state sponsor of terrorism," said Sen. Marco Rubio, R-Fla., the bill's primary sponsor.

Rep. Ed Royce, R-Calif., the chairman of the House Foreign Affairs Committee, also introduced a bill that prohibits cash payments to Iran and demands transparency on future settlements.

"Sending the world's leading state sponsor of terror pallets of untraceable cash isn't just terrible policy," Royce said. "It's incredibly reckless, and it only puts bigger targets on the backs of Americans... This cash bonanza has emboldened Iran's radical regime, and undermined America's national security."

Both the House and Senate plan to hold hearings on the payments.

This story has been updated.