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A Project of The Annenberg Public Policy Center

Trump’s Fanciful Iran Negotiation

In spinning a fanciful tale of how he would have negotiated a tougher nuclear agreement with Iran, Donald Trump betrayed a fundamental misunderstanding of who controlled billions of dollars in Iranian assets that were unfrozen as part of the deal. Trump incorrectly claimed that Iran’s money was held by the U.S.

At a rally in North Carolina, Trump said he would have told Iranian officials that “we don’t have the money” to pay back Iran, because of a “bad budget” and large U.S. debt. “I’m not gonna be able to give you the $150 billion back,” Trump said. “I can’t do it.” Trump is right (inadvertently) about one thing: “We” don’t have the money. The Iranian assets were held mostly by banks and other financial institutions outside the U.S.

Trump has been a frequent critic of the nuclear deal with Iran, and he has repeatedly argued that the Obama administration negotiated a bad deal. That’s a matter of political debate. But in retelling how things could have played out differently, Trump gets some basic facts wrong.

Here is a fuller account of Trump’s statements at a rally in North Carolina (starting at the 49:09 mark).

Trump, July 5: We gave them [Iran] back $150 billion. I would have said it differently. I would have said — you know my father used to say, “Son you’re too tough. Take the lumps out. Soft, nice and easy.” …

In the old days I would have said, “We’re not giving you the $150 billion.” And they would have been angry and we would have had lots of problems, right? I wouldn’t say it that way anymore. My father taught me too well. …

Because the Persians are great negotiators and they totally out- negotiated. So I would have said, “Fellas, do me a favor. We have a problem. We have a bad budget that was just passed. The omnibus budget. Disaster. We’re going up to $21 trillion in debt. We don’t have the money. I’m sorry. I apologize. I won’t be able to pull it off, I’m not gonna be able to give you the $150 billion back, I can’t do it. I want to do it. I want to do it so badly. And you’re right, you should get it. You should get it, ah, you’re right, but we don’t have the money, I’m sorry.

And they’ll go crazy. And then we leave and we say the hell with them, double up the sanctions again and they’ll say, “We’ll drop the $150 billion.” We have rank amateurs dealing for us.

As part of the Iran nuclear deal, known as the Joint Comprehensive Plan of Action, Obama agreed in 2015 to suspend or waive some international sanctions, including lifting a freeze on Iranian assets. Sanctions experts told us Trump’s comments show a fundamental misunderstanding of those frozen assets.

“These assets belonged to Iran but they were frozen in international financial institutions,” explained Nader Habibi, a professor of economics at Brandeis University’s Crown Center for Middle East Studies. “The United States did not give any money to Iran. It simply allowed Iran to transfer its money from other countries to its own banks and domestic institutions. The money became available for Iran to spend.”

“The U.S. is not holding these assets,” Michael Malloy, professor of law at the University of the Pacific and an expert on economic sanctions, told us over the phone. “They are held by the people who were involved in transactions with Iran. The economic sanctions the U.S. and other countries imposed froze the assets in place. But they are still held by banks and commercial companies and other commercial actors who had them in the first place.”

Richard Nephew, a sanctions expert who was on the State Department team negotiating with Iran, told us via email that the U.S. threatened punishment for those banks, and their governments, if they made available to Iran any assets covered by the sanctions.

“The United States, with very very few exceptions, has not frozen or held any Iranian assets within U.S. jurisdiction, let alone U.S. government accounts,” said Nephew, who now works at Columbia University’s Center on Global Energy Policy. “The assets in question were held in banks in China, Japan, and Korea, primarily. Some residual assets were in Europe, India, Turkey and a few other jurisdictions.”

In other words, most of the frozen assets involved transactions that never directly involved the U.S. at all. As the Washington Post reported, “Many of the countries received waivers to purchase Iranian oil and gas during the sanctions, but placed the payments in escrow-style accounts that remained off-limits to Iran.”

Experts said Trump’s reference to U.S. debt as a reason Iran would not get its money back is nonsensical.

“It is a ridiculous idea on its face, starting with the fact that the money in question was not in the United States,” Nephew said. “Even assuming that it was held in the United States, the Sovereign Immunities Act would generally prohibit such blatant expropriation.”

Said Habibi: “These assets are in no way related to the US debt. They are held in banks of European and Asian countries. For example China bought oil from Iran and deposited the payment in a Chinese bank but Iran could not transfer that money from China to Iran because of sanctions. Now it can make the transfer.”

The experts also believe Trump’s claim that the deal unfroze $150 billion in Iranian assets is inflated.

In February, Iran announced that it had “access to more than $100 billion in previously frozen assets,” the Washington Post reported. But the figure may actually be significantly lower than that.

“Based on my research the total amount of Iran’s assets that were released as a result of the nuclear agreement were between $25 billion to $50 billion,” said Habibi, who detailed that calculation in an article for The Conversation, a site that publishes articles from academic and research experts.

Nephew said the $150 billion figure touted by Trump and others is “the total amount in Iranian assets being restricted by force of U.S. law. This includes assets located inside Iran itself but, for reason of ownership, were not permitted to be transferred outside of Iran.”

“The total amount of foreign-held assets was probably something closer to $100 billion,” Nephew said. “A further 50 or so billion were encumbered already in some fashion, such as contracts already signed. So, the Treasury’s number of Iran’s relatively free moving assets was around $56 billion. Some in Iran put the number at $36 billion. And, of course, it changed on a monthly basis depending on Iran’s oil sales.”

So to sum up, in the imaginary negotiation Trump related, he inflates the amount of assets unfrozen as a result of the nuclear deal with Iran, and he relies on the faulty assumption that the U.S. government held the assets, and could therefore argue that due to rising debt it could not afford to pay back Iran.