Iran may yet pay its IOUs -- at 100 cents on dollar
American businessmen, especially bankers, appear to be pulling out of the Iranian revolution in much better shape than they did after past foreign upheavals.Skip to next paragraph
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It took 30 years before the United States finally recouped some of its losses from the 1949 Chinese revolution. China paid off American claims in 1979 at a rate of 42 cents on the dollar.
"That was considered quite an achievement," says a Treasury Department spokesman, who added that the US has never been repaid for losses in Cuba.
The Iranians, on their own initiative, have offered to repay bank loans at a rate of 100 cents on the dollar, in what is said to be an effort to regain financial respectability. Thomas G. Shack, a Washington attorney who represents Iranian interests here, has said that Iran's government "always said it will honor its legitimate obligations."
It is also true that during the Iranian revolution, the US has had an unusual advantage: control over $12 billion in Iranian assets as a guarantee of repayment.
So far, bankers have clearly benefited from the agreement that freed the 52 American hostages held in Iran. Although the US has released $7.977 billion of frozen Iranian assets to a special account in Algeria, most of that money goes straight into the hands of bankers.
The Iranians have gained use of only $2.89 billion of their assets -- at least for now. Of the $7.977 billion released so far, $3.6 billion went to repay American and foreign banks that have syndicated loans to the Iranian government, and $1.4 billion has been set aside in Algerian hands for repaying other bank loans and claims.
The only major dispute still hanging over bankers is how much interest they must pay Iran for the 14 months they held the frozen assets. Under the agreement, banks have been charged $800 million in interest, but they argue that the amount is $130 million too high.
"We were forced to hold these funds," said a spokesman for Bank of America, which held $2.39 billion of the Iranian assets and has been charged $319 million for interest on that money. He added that the bank was forced to keep the money in low-yield, highly liquid investments so that it could be quickly transferred.
The Bank of America expects to negotiaate with Iran to reduce the interest or else take its case to the international tribunal that will be set up to settle other claims against Iran.
It is those other claims that will be the most difficult in the coming months , as American contractors and other companies try to recover from Iran millions of dollars in lost property and unpaid bills.
The agreement calls for releasing $4 billion, the last Iranian assets held in banks and other institutions here, to the Iranians. Since much of this money has been attached by the estimated 300 to 380 lawsuits filed by American companies, the legal battle over this last $4 billion could stretch into years and even wind up in the US Supreme Court.
Former Attorney General Benjamin R. Civiletti, in a letter to President Carter on the eve of the hostage release, said the President was clearly within his power to order the $4 billion released and to nullify all claims against the money. The Department of Justice has defended the Iranian agreements in a statement filed last week in federal courts in Boston, New York, and the District of Columbia.
Under the Iranian agreement, American companies must give up their suits in US courts and take their claims to a nine- member international tribunal to be set up in 90 days. The Iranians also have promised to set up an escrow fund of funds are paid out, the Iranians have agreed to replenish the account so that it does not fall below $500 million.
Lawyers are divided as to whether the President has the constitutional authority to force American companies to use the international tribunal. While some assert that the authority comes as part of his power to direct foreign policy, others warn that canceling the lawsuits amounts to an unconstitutional denial of rights.
The deciding point will probably be whether the companies are satisfied with the payment they receive. "It may be a reasonably good deal," a lawyer representing some of the American companies said of the tribunal. He said he is concerned that some businesses, including one with an $80 million claim will be excluded because of clauses in their contracts that require them to settle in Iranian courts.
Will the American companies resist the order to drop their lawsuits here? "They may be forced to, but I don't think they're going to roll over and play dead willi ngly," said the lawyer, who asked not to be identified.