An $8 Billion Dilemma

Will the Iranian assets thaw as fast as they froze? No

Once the Iranian parliament set the terms for freeing the 52 American hostages, a major question loomed in the minds of bankers and businessmen around the world. How, exactly, will President Carter be able to meet the Khomeini government's demand that he unfreeze $8 billion in official Iranian assets that were blocked last November in U.S. banks and overseas branches? Insisted one top Treasury Department policymaker: "We're sure as hell not going to let a couple of courtrooms stand in the way of releasing those Americans." Nonetheless,

Chase Manhattan Bank Chairman David Rockefeller has already warned that the Iranians will be very disappointed if they expect to get their hands on those funds immediately.

A number of factors could cause a delay. After the Iranian deposits were frozen almost a year ago, many big banks followed the lead of Chase Manhattan and used their Iranian deposits to offset loans made to the late Shah of Iran that had gone into default. More troublesome, though, are the claims by insurance companies, computer software firms, construction outfits, airlines and private individuals against the Iranian funds. Said one New York banker last week: "They were lined up around the block as if to see an X-rated movie."

The result is a bewildering googolplex of suits, countersuits, liens, writs, motions and applications that will probably meander through the courts for years.

Michael Mealey, an enterprising Pennsylvanian, now edits a newsletter, Iranian Assets Litigation Reporter, that tells about the latest legal skirmishes and costs $1,800 a year.

There is now some dispute over exactly how much in Iranian funds is frozen. Treasury Department officials, who are charged with keeping score, concede that the tally may now be closer to $11 billion than $8 billion. The 1.6 million oz. of Iranian gold on deposit at the Federal Reserve Bank of New York, for example, was valued at about $600 million in November 1979, but it is now worth more than $1 billion because of higher gold prices. Meanwhile, interest has been accruing on the $5 billion worth of Iranian deposits in U.S. banks.

The National Security Council and the State Department are considering different ways to return as much money to Tehran as quickly as possible, but no final decisions have yet been reached. The gold and an extra $1.3 billion that the Iranians have invested in U.S. Government securities could be shifted quickly into an Iranian account. Even the $ 1.5 billion that private banks have seized to offset their Iranian loans could probably be pried loose with the cooperation of international bankers. There would probably be an understanding that the Iranians would accelerate the settlement of the old loans. So far, the Khomeini regime has continued to make payments on the non-American portions of Iranian debts.

The real stumbling block in settling the Iranian assets issue will be the claims brought by companies and individuals who were owed money for work they once did in Iran, or who have been the victims of expropriation since the revolution. The latest of these claimants is Xerox, which last week asked a federal court for a lien of $85 million against the frozen assets. Xerox is seeking to receive payment for Rank Xerox Iran, a company that it owns jointly with Britain's Rank Organization. Iran's Bonyad-e Mostasafin, a foundation set up by the Iranian government to seize the Shah's holdings, has now allegedly taken over the company.

There are more than 270 separate legal actions like the Xerox one, and the claims total about $6 billion. In September, Federal Judge Kevin Duffy confirmed the attachment of assets amounting to about $3 billion. This means that $3 billion in Iranian assets cannot be removed from U.S. banks until the legal claims on them are resolved by American courts: This could take decades. Indeed, cases of U.S. claims against Cuban expropriation of American assets after Fidel Castro came to power in 1959 are still awaiting settlement.

Administration officials say that it is likely the President would commit the U.S. to return all the Iranian assets, but he would leave the precise method for doing so to be determined later. The Iranians, who find themselves increasingly isolated in the world community and short of money to fight an expensive war, are apt to go along with a compromise. Whatever the immediate solution, the real winners may be the lawyers, who are likely to earn their own fortunes fighting court battles over the Iranian funds.

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