Hostage Breakthrough

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First relayed to Tehran by the Algerians on Jan. 2, this proposal placed the value of frozen Iranian assets at about $9.5 billion. Iran had claimed that it had some $14 billion deposited in U.S. banks and their branches in Europe. Of the $9.5 billion, the U.S. was willing to transfer up to $5.5 billion to Iran on the day the hostages were released. Iran would be able to recover another $1.8 billion once it had worked out separate arrangements with U.S. banks from which the Iranian government, under the Shah, had borrowed most of the money. Iran had never repudiated these loans and had been making repayments until the U.S. froze its funds. Then the American banks declared the loans in default and repaid themselves from the frozen assets. Under U.S. Government prodding, the banks apparently were willing to reinstate the loans, if Iran agreed to reassume the obligations, and then relinquish their claims against Iran's deposits. That still would leave about $2.2 billion in Iranian funds in the U.S. This amount is tied up in suits filed by various U.S. corporations, which contend that Iran owes them money for breaches of contract and expropriated property. The Carter Administration offered to go into court to get these claims dismissed and settled instead by an international arbitration panel.

As Christopher worked in U.S. Ambassador Ulric Haynes Jr.'s residence, a stately 18th century Moorish villa, he had no way of knowing whether Iran would accept the lower American estimate of its frozen assets, or whether it would insist, as it had before, that the U.S. must turn over some $10 billion as a down payment on whatever it can recover from the late Shah's reputed assets in the U.S. The Administration, which contends that the Shah had no such huge wealth in the U.S., had proposed instead to try to identify any of his properties in America and support Iran's legal claims against them. Another hurdle loomed high: none of Iran's quarreling factions wanted to get tagged at home as having compromised with the U.S. Thus the Algerians became increasingly important as a third-party buffer, arbitrator, or "guarantor," as some Iranian officials conveniently termed them.

For the American team in Algiers, the week did not begin auspiciously. It snowed on Monday—a rarity in the city. Nor did the pace of the negotiations seem hurried. Christopher had time to pay a courtesy call on Algerian President Benjedid Chadli and later met visiting Foreign Minister Hans-Dietrich Genscher of West Germany over drinks before holding a 75-minute working session with Algerian Foreign Minister Mohamed Seddik Benyahia.

In Tehran, however, things looked briefly brighter. Officials there had portrayed the latest U.S. proposals as "Algerian" statements, which presumably would make them easier for the Iranian populace to accept. Azizi, Iran's second-ranking spokesman on the hostages, declared that points raised by the Algerians "have been considered, in principle, acceptable," and he predicted that they would "most likely be accepted by the Iranian government." After talking to Christopher by telephone, Carter said cautiously in Washington: "It looks better, but I can't predict success."

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