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Cash For Hostages

downtown Tehran, viewed against the mountains with an airplane in the distance
Tehran, Iran. Photo by Flickr user Ninara.

Stupidity can be defined as the inability to learn from one’s mistakes. When it comes to dealing with Iran, the U.S. government – notably but not exclusively evidenced by the current administration – is spectacularly dense.

As I, and others, have written many times before, paying ransoms for hostages merely ensures that more hostages will be taken. This is why hostage-taking has been Iran’s M.O. for decades, stemming from the capture and subsequent release of the U.S. Embassy hostages 35 years ago. In that case, Washington merely agreed to shield Iran from liability for damages claimed by the 52 Americans who were detained and, in some cases, abused for 444 days. That agreement led the State Department, operating in 2002 under a president who characterized Iran as part of an “axis of evil,” to block former hostages’ attempt to collect damages, even if no direct ransom money changed hands.

At least when President Reagan eventually took responsibility for the arms-for-hostages fiasco that was meant to raise funds for anti-leftist Nicaraguan Contra rebels, he acknowledged that the deal was, in fact, an arms-for-hostages swap. After the Tower Commission report into the details of the Iran-Contra matter, Reagan gave a televised speech in which he acknowledged, “It’s clear from the Board’s report, however, that I let my personal concern for the hostages spill over into the geo-political strategy of reaching out to Iran.” While the historical record suggests this was a simplification, there is probably a grain of truth here.

It is only human to feel empathy for hostages and their families and friends. On an individual level, we want innocent people to regain their safety and their freedom. But when the government keeps making “one-time gestures” to reward Iran or other bad actors for hostage-taking, it simply ensures that more hostages will suffer in the future.

Whether a future administration will learn this lesson remains to be seen. The current one plainly has not. This week, The Wall Street Journal reported that four American hostages detained in Iran were released concurrently with $400 million in cash arriving in a transfer arranged by our government.

The Obama administration continues to maintain the fiction that it was not paying a ransom when it piled Western hard currency (though not U.S. dollars, since transactions with Iran in dollars are illegal) into a cargo plane that delivered the cash to Tehran just as Iran released the detained individuals at the start of this year. At the time, the deal was characterized as a hostage-for-prisoners swap, which was bad enough on its own in that it still offered a reward for Iran’s unlawful detention of American citizens. Now, however, it has become clear that whatever the administration’s intentions, Iran had every reason to view the previously undisclosed $400 million as a cash ransom.

John Kirby, a spokesman for the State Department, insisted that the deals were negotiated by different teams for unrelated reasons. The $400 million, paid in Swiss francs and other currencies, was the first installment of a $1.7 billion settlement designed to resolve a longstanding dispute over a failed 1979 arms deal. The fact that the cash reportedly arrived the same day that the hostages were released was, according to administration officials, pure coincidence.

The administration’s claim seems mainly designed to let it keep fooling itself; nobody else believes this nonsense. Least of all the Iranians, who have publicly called it a ransom payment – and who have since detained still more Americans. Even within the administration, senior Justice Department officials reportedly objected to the payment’s timing due to how it would look to Iran, not to mention everyone else. Even an observer willing to perform the mental gymnastics necessary to believe the two events were unrelated would have to admit that if a kidnapper believes a payment to be a ransom, it does not really matter whether the payer believes a ransom has been paid.

According to the Journal, since the cash shipment, Iran’s Revolutionary Guard has arrested two more Iranian-Americans, as well as dual citizens from Canada and Europe. Given the strong incentives we have provided, we can expect Iran’s hostage-taking to continue for the foreseeable future. Even when no cash exchanges hands, prisoner exchanges such as the one at the center of the Bowe Bergdahl case still provide plenty of encouragement to those who wish to profit from snatching Americans and other Westerners.

Want these hostage situations to end? Start making the people who take them pay a real and painful price, rather than paying one to them. This solution will require the fortitude to make some tough choices, and somewhere along the line some innocent person or people will inevitably suffer. That’s a terrible outcome, but the results of paying hostage takers are certain, in the long run, to be even worse.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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