What Options Tehran Has in the Face of US Seizure of $2bn of Iranian Bonds?

Tuesday, May 3, 2016

Ali Omidi
Associate Professor of International Relations at University of Isfahan, Iran

On April 20, 2016, following a lot of legal and political tug of war, the Supreme Court of the United States approved with a majority vote a decision by an American lower court for seizing two billion dollars worth of Iran's assets, which were trusted to a Citibank account in New York in the form of bonds. This decision by the Supreme Court and subsequent support of the US Department of State for the decision was so bitter that Hassan Rouhani, the President of the Islamic Republic of Iran, described it as explicit theft of Iran's assets. Before that, Iran's Foreign Minister Mohammad Javad Zarif had said in an interview with the New Yorker that the measure was similar to “highway robbery.” During two rounds of talks with John Kerry, the US Secretary of State, on the sidelines of the United Nations conference on climate change on April 21 and 22, 2016, in New York, Zarif condemned the measure by the US Supreme Court and called for its revocation. Evidence shows that Kerry has not promised anything to Zarif in this regard because in view of the United States’ Constitution and the principle of division of powers, the executive branch is not able to revoke the decisions of the Supreme Court. Therefore, this ruling is considered as final and Iran's money and assets are practically gone.

This measure by the United States can have grave consequences and effects on already tense bilateral relations between Tehran and Washington as well as on international relations. The most important effect of this measure is that the wall of distrust between the two countries will grow higher, the United States’ credit will be further undermined before the Iranian and global public opinion as a country that cannot keep a trust, dismay and desperation about possibility of détente will overshadow relations between Tehran and Washington, and any effort to use trade exchanges as a ground for normalization of relations between the two countries will be given up. On the other hand, the negative image of the United States among Iranians will linger and the ground will be paved for the empowerment of radical figures in Iran and weakening of Rouhani administration.

At any rate, this development has already unraveled and Iran's money is practically lost. Now, what options are available to Iran in order to respond in kind. This article merely analyzes possible options, without offering any specific recommendation.

1. Directed or mediated diplomatic dialogue: An example of such talks is negotiations between Zarif and Kerry on the sidelines of the ceremony held to sign the UN climate agreement at the United Nations headquarters (on April 22, 2016), during which the two sides discussed obstacles to implementation of Iran's nuclear deal, dubbed the Joint Comprehensive Plan of Action (JCPOA), and other issues. Such dialogue can continue through mediation of third states as well. However, since the ruling handed down by the US Supreme Court cannot be revoked by the America’s executive branch, to show its goodwill, the US administration can possibly reduce trade and financial restrictions against Iran in other fields. Otherwise, Iran cannot do anything to take that two billion dollars back. This option, however, would hardly convince the public opinion in Iran.

2. Referring the case to The Hague Tribunal or other courts of arbitration: In both cases, the two sides’ consent would be necessary for the judicial hearing to get underway. Getting the United States’ consent to attend sessions of arbitrations courts is impossible. The only option is the International Court of Justice (ICJ) in The Hague, because according to 1955 Iran-United States Treaty of Amity, Economic Relations and Consular Rights and based on Article 21 of that treaty, it is possible to refer the above case to the ICJ. However, given the court’s background with regard to the case of Iran's oil platforms, in which the ICJ confirmed that the platforms were destroyed by the United States, but did not make Washington pay remuneration as per 1955 Amity Treaty, that case may be repeated here. However, since the case over oil platforms took place after limited military conflict between Iran and the United States in the Persian Gulf and in the new case Iran is totally innocent, the ICJ’s ruling may be different this time. However, nothing can be predicted. The positive side of this option is that Iran will be introduced as a law-abiding country and perhaps recourse to such an option would be inevitable for those governments that lack balance of power in the face of the opposite side.

3. The last option is recourse to force: In this option, according to principles of reciprocity and reprisal in international law, governments are permitted when faced with illegal measures by other governments to take reciprocal measures even though their act of reprisal may seem to be lacking in legal basis. This reciprocity and act of reprisal is merely taken to put an end to illegal and hostile action of the other government. This option, which has its roots in real politics, argues that in such a case when the US cannot be reasoned with, it should be  forced to give the confiscated assets back. An instance of such option can be to stop and seize an American vessel in the Persian Gulf, so that, the US administration would have to give Iran's assets back in return for the vessel. Of course, enforcing this option would be very dangerous and would entail the risk of escalation of the crisis into an outright war. However, if the crisis can be managed, this option may be worth taking into account. There is no doubt that countries like Saudi Arabia and Israel would love to see a military conflict between Iran and the United States and subsequent destruction and disintegration of Iran like what happened in Syria. Therefore, when taking the third option into account all its dimensions must be carefully assessed.

Key Words: US Supreme Court, Two Billion Dollars, Iran's Assets, Citibank, New York, Bonds, US Department of State, Hassan Rouhani, Options, Grave Consequences, Iranian Public Opinion, Diplomatic Dialogue, The Hague Tribunal, Recourse to Force, Omidi

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*Photo Credit: Sputnik News

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