"The funds are gone! things are on track." So said one New York City banker enthusiastically as President Jimmy Carter was preparing to announce that a complete financial agreement had been reached with Iran over the release of the American hostages.
No cash actually exchange hands. Instead, Telex messages from the 12 US banks holding Iranian assets sped the funds to the Federal Reserve bank of New York early Jan. 20 which in turn shifted them to the Bank of England in London for dispersal.
A spokesman for the Bank of America in San Francisco said that the electronic transfer of Iranian assets that bank was holding, unofficially estimated at just under $2 billion, was "the biggest transfer of funds in our history."
The financial negotiations hit a snag Jan. 19 when an Iranian official found fault with "an appendix" to the overall agreement drawn up by US banks. the appendix dealt with the issue of how much interest US banks would be required to pay on the frozen Iranian assets, unofficially estimated at $7 billion to $8 billion.
But a more important question to US banks had already been settled, even as the roadblock to a complete agreement emerged the day before President Ronald Reagan's inauguration. This, according to banking sources, was the requirement that Iran repay outstanding loans to US banks and that a special escrow account be set up pending the final payment of the loans made before the Iranian revolution.
A few weeks ago, as negotiations for release of the 52 American hostages gained momentum, bankers had been left with only the vaguest assurances of guarantees that Iran would pay back loans which some industry experts estimate at around $4 billion.
At that time, one banking source says, bankers were worried that the Carter administration was "going to make them a sacrificial lamb" by not demanding that a special account be established to guarantee Iran would repay its debts. So "there was a lot of pressure put on the Carter administration" to accomplish this aim.
The final agreement apparently calls for Iran to repay immediately some $3.6 billion in syndicated loans from American and European banks. Banking sources say these loans are largely held by US banks with European partners having only a comparatively small share. In addition, an escrow account of $1.5 billion has been opened pending resolution of legal disputes surrounding other loans to Iran.
The Morgan Guaranty Trust Company, for example, has had approximately $65 million in Iranian loans outstanding. In Morgan's case, that is a major chunk of the Iranian assets it had prior to Mr. Carter's executive order unfreezing all the assets. Although the exact amount of the Iranian assets Morgan held was not available at this writing, sources said it was between $200-$300 million.
The agreement also provides that an estimated 300 legal claims by US companies that had property confiscated by the Iranian government following the late Shah's ouster be settled by an arbitration panel of nine or more members, one-third of which would be made up of US citizens. Another third would be Iranians, and the other members would be chosen by mutual agreement.
A spokesman for the Xerox Corporation, which had property confiscated by Iranian authorities, notes that while lawyers were still not clear on this aspect of the joint US- Iranian agreement, the company initially appeared satisfied that it could go a long way toward recouping its losses in Iran.
The agreement prevents the former US hostages from taking legal action against the Iranian government. But it doesn't bar hostages or their families from suing the US government, which many legal experts presume will happen.