U.S.–Iran Deal: Will the Exchange of Prisoners and the Release of Frozen Funds Lead to Broader Understandings?

The United States and Iran have reached a preliminary deal that will eventually lead to the release of five Iranian–Americans being held in Iran after billions of dollars of frozen Iranian assets are transferred from banks in South Korea to Qatar, which mediated between the two arch-rivals.

The official Iranian News Agency (IRNA), citing Iran’s mission to the U.S., revealed that the deal also includes the release of five Iranians detained in the U.S. who are serving prison sentences for violating sanctions imposed on Iran.

Human rights groups say Iran has been engaged in hostage-taking for decades, wielding foreign prisoners as leverage over other governments.

Tehran and Washington severed their diplomatic relations in 1980 following the revolution in Iran. Tensions escalated after former U.S. President Donald Trump withdrew his country from the nuclear deal unilaterally in 2018.

Since then, the U.S. has re-imposed severe sanctions on Tehran, prompting the latter to abandon many of the nuclear commitments it made under the deal.

However, the last deal is bound to open U.S. President Joe Biden’s administration to fresh criticism from Republicans and others that it is helping boost the Iranian economy at a time when Iran poses a growing threat to U.S. troops and Mideast allies.

 

Prisoner Exchange

After two and a half years of Joe Biden assuming the presidency in the U.S. and embarking on his vigorous diplomacy with the religious leadership in Iran, his administration recently reached its first deal with it.

Washington and Tehran reached a deal to free five imprisoned Americans in exchange for the release of Iranian prisoners and the unfreezing of about $6 billion in Iranian oil revenues, the New York Times reported on August 10.

As a first step in the deal, which comes after more than two years of negotiations, Iran allowed four American citizens of Iranian origin to move from Tehran’s Evin Prison to house arrest, to join a fifth person who was already under house arrest before the deal was announced.

Among those five prisoners, Iranian–American businessman Siamak Namazi, the head of strategic planning at the Dubai-based Crescent Petroleum, was arrested in October 2015 and sentenced to 10 years in prison for espionage, in addition to the Iranian–American investor Emad Shargi, who was sentenced to 10 years in prison on charges of espionage, and Morad Tahbaz, an Iranian–American environmental activist who also holds British citizenship and was arrested in January 2018 and sentenced to 10 years in prison on charges of espionage and conspiracy with the United States.

The identity of the fourth American citizen who was allowed to leave prison was not announced, nor was the fifth citizen already under house arrest.

Reuters quoted a source as saying that Tehran will allow the Americans to leave Iran after the lifting of the freeze on $6 billion of frozen Iranian assets in South Korea.

This money represents amounts owed, but not yet paid, by South Korea to Iran as a result of its purchase of Iranian oil before the U.S. sanctioned such transactions in 2019.

The New York Times indicated that this deal with Iran—the arch-rival of the U.S.—is the latest in a series of high-profile prisoner exchanges secretly designed by the Biden administration in an attempt to return Americans that the State Department considers to be unjustly detained in foreign countries.

On August 7, the Iranian Khorasan daily reported that Tehran had recently arrested an Iranian–American woman.

It wrote that the reason for the stalemate in the indirect negotiations between Iran and the U.S. on the exchange of prisoners is related to the issue of her release.

Recently, Fars News Agency revealed that her name is Munireh Teres Baseer, an Iranian–American activist who has been working with international institutions on Afghanistan. In recent weeks, according to media reports, she was transferred to house arrest.

The Iranian government has long declared its willingness to implement a prisoner exchange deal, under which dual-national prisoners would be returned to the U.S., but set conditions that prevented any progress, according to U.S. officials.

 

Frozen Iranian Assets

On August 10, Iran announced the start of the process of releasing frozen assets in South Korea amid U.S. assurances that the deal does not include Tehran obtaining any relief from sanctions.

The source added that the frozen funds in South Korea will be transferred to a bank in Switzerland and then to an Iranian bank account in Qatar.

Some in Iran opposed this data and claimed that Tehran would have complete control over the funds, while Qatar did not comment publicly on how it would monitor the disbursement of funds.

The Iranian Ministry of Foreign Affairs confirmed in a series of posts on X (Twitter) that the disposal of these funds will be the responsibility of the Iranian authorities, noting that these funds will be spent to meet the various needs of the country as determined by the competent authorities.

On August 12, the governor of the Central Bank of Iran, Mohammad Reza Farzin, announced the lifting of the ban on all Iranian funds frozen in South Korea, adding that it would be used to purchase non-sanctioned goods.

The statement published by Farzin confirms what Washington announced a few days ago that there will be restrictions on what Iran can do with any funds released under the latest deal.

In the context, U.S. Secretary of State Antony Blinken confirmed that the deal does not mean that any sanctions imposed on Iran will be eased.

“We will continue to impose all our sanctions. We will continue to resolutely confront Iran’s destabilizing activities in the region and beyond, and these efforts do not contradict those,” he added.

In a separate context, Mohammed Al-Khulaifi, Minister of State at the Qatari Ministry of Foreign Affairs, said that Doha played a pivotal role in facilitating dialogue between the U.S. and Iran.

He added, “Qatar hopes that the U.S.–Iranian deal will lead to broader understandings, including a return to the nuclear deal,” noting that the deal enhances the security and stability of the region.

In turn, analyst Ibrahim Khatib warned, in a statement to Al-Estiklal, against raising the ceiling of future diplomatic expectations, pointing out that the prisoner deal between Tehran and Washington may not be a sign of any greater diplomatic opening.

He pointed out that the Biden administration was keen, during the recent deal, to show that the U.S. still maintains a tough stance on Iran, even though it was secretly concluding security deals with Tehran.

Mr. Khatib explained that the deal serves the interests of U.S. President Joe Biden, who is close to running for the presidential elections, which makes him concerned with calming the confrontation with Iran and focusing on confronting China.

 

Broader Understandings

The announcement of the prisoner exchange deal between the U.S. and Iran brought back the file of Tehran’s nuclear program to the fore, with talk of an informal deal between the two countries to reduce escalation between them after it reached critical points with Iran’s military support for Russia in its war on Ukraine, in addition to the tension in the Persian Gulf and the security of navigation in it.

In an article, the New York Times dealt with the dimensions of the deal and the possibility of it leading to more diplomatic cooperation between the two parties in order to achieve the goal of Biden’s administration to contain the Iranian nuclear program.

Although U.S. officials have repeatedly denied reaching a nuclear deal with Iran, after the indirect talks that were held in Oman earlier this year, officials from several countries spoke to the newspaper about a deal that Iran appears to be committed to, which includes keeping Iran’s enrichment of uranium at levels of purity not exceeding 60%, and not carrying out major attacks against U.S. forces by Iran-affiliated militias in Syria and Iraq.

The newspaper quoted two officials in the Israeli Ministry of Defense as saying that the latest deal is part of broader understandings reached in Oman, and these understandings are already being implemented on the ground.

The New York Times also quoted Henry Rome, Senior Fellow at the Washington Institute for Near East Policy, as saying that the Biden administration hopes to resume formal EU-organized nuclear talks with Iran later this year.

The negotiations, which were seeking to return to the 2015 deal that former President Donald Trump withdrew from in 2018, stalled last summer due to what U.S. officials described as unacceptable Iranian demands.

The Biden administration appears to favor informal deals with Iran, as happened in the current deal, to avoid the U.S. Congress where a number of lawmakers, including Democrats, question any steps to provide Iran’s authoritarian and repressive government with economic and political relief.

The unwritten deal between Tehran and Washington sparked a wave of criticism from Republican politicians as well as Iranian political activists.

According to Reuters, the potential money transfer drew immediate criticism from Republican lawmakers, considering that Democratic President Joe Biden paid a ransom for the release of American citizens and that Iran’s use of this money will enable it to support its nuclear program or support its armed militias in countries such as Iraq, Lebanon, and Yemen.

It is noteworthy there have been three prisoner exchange deals between Iran and the U.S. in recent years, the most important of which is: a deal on January 16, 2016, during the presidency of Barack Obama, coinciding with the implementation of the nuclear deal, which is the largest exchange deal between the two countries.

Under this deal, Iran released five American citizens who were detained on charges of espionage, four of whom are of Iranian origin who also hold American citizenship, including the Washington Post bureau chief in Tehran, Jason Rezaian.

On the other hand, the U.S. released seven Iranian citizens it had arrested on charges of circumventing sanctions.

In the first prisoner exchange deal between Tehran and Washington during the era of Donald Trump, on December 7, 2019, the Iranian academic Masoud Soleimani was released by Washington in exchange for Tehran’s release of the Chinese-American academic Xiyue Wang.

In another deal, on June 5, 2020, Iran released former U.S. soldier Michael White in return for Washington’s release of Iranian scientists Majid Taheri and Cyrus Askari.

On its part, The Wall Street Journal reported in an article on August 13 that rewarding Iran for the release of the hostages is financing malicious activities and encouraging the arrest of more Americans.

According to the newspaper, the interpretation of U.S. officials for humanitarian purposes to pay more than $6 billion to Iran is a political cover to justify the money-for-hostages deal.

“Similar to the money Iran got from the nuclear deal, these assets will be used to spread chaos in the Middle East and beyond, and part of it will be used to strengthen militia forces inside Iran, and another part to produce drones for use in Russia’s war against Ukraine,” it added.

“Iran knows Biden wants to push any crisis over Iran’s nuclear program past the 2024 election, due to his administration’s inability to provide guarantees to Tehran that the deal with a new president cannot be undone, amid odds indicating the return of Donald Trump to the White House,” the newspaper noted.