Did US lose bargaining chip in talks on Iran assets?

By sending conflicting diplomatic signals to Iran, the United States complicated efforts to nurture better relations with the Islamic republic and to secure the release of American hostages in Lebanon. That is the view of some knowledgeable observers familiar with ongoing negotiations between the US and Iran over the disposition of Iranian funds held in the US.

At the same time that officials at the National Security Council were secretly sending arms to Iran as a gesture of goodwill, other administration officials were refusing to compromise with their Iranian counterparts in the asset negotiations.

If the recent public statements of leading Iranian officials are any indication, the disposition of more than $1 billion in Iranian assets, frozen during the Carter administration, might have been a key both to improving relations and to obtaining Iranian help in securing the release of the US hostages.

Tehran Radio reported yesterday that Hojatolislam Hashemi Rafsanjani, the Speaker of the Iranian parliament, said: ``If the US wants to see its problems in the Middle East solved, it should give up bullying, it should prove its non-hostility to the Islamic Republic of Iran. The US should release our frozen assets. In that case we would be prepared to intercede with Lebanese mujahedin [Muslim fighters] for freedom of hostages. Of course, our intercession will be effective [only] when America pays attention to their demands.''

Mr. Rafsanjani's remarks echo others he and Iran's representative at the United Nations, Rajaei Khorassani, have made recently.

Rafsanjani also tied Iranian help to the release of more than $200 million in arms purchased under the late Shah but never delivered.

But according to sources familiar with the negotiations over the assets, the US may now have lost the opportunity to use the talks as a means to improve relations.

``The game is over,'' says a lawyer involved in the process. ``We have long lost control over the assets negotiations as a bargaining chip.

``It's hard to imagine saying on one hand that we're trying to sell arms because we want to restore good relations, and on the other hand doing something that could only create bad faith,'' he says.

US government officials say that negotiations over the frozen assets are not linked in any way to efforts to free the US hostages held by pro-Iranian factions in Lebanon. But some experts contend that they should have been linked. They say that, by affecting the overall atmosphere of US-Iran relations, lack of progress on the talks may have diminished the prospect that Iran would lend its help in resolving the hostage problem.

``The real story is poor technical coordination in the US government,'' says the lawyer. ``What happened here was a series of policies going on independently that cast doubt on the technical competence of the people running them because they weren't on the same track.

A nine-judge tribunal to resolve disputes over the Iranian assets was established by the 1981 Algiers Accords, which led to the release of 52 American diplomats held hostage in Tehran since 1979.

The tribunal was charged with investigating nearly 4,000 compensation claims arising from banking and business relationships between the US and Iran.

Among the issues before the tribunal is the disposition of roughly $500 million overpaid by Iran into an escrow account at the Federal Reserve Bank of New York. US officials, taking a hard-line position, denied that Iran had a right to the surplus funds. But on Aug. 20 the tribunal announced a ruling that the US should release the money to Iran.

Iranian officials have emphasized that transfer of the $500 million and settlement of other claims before the tribunal might play an important role in putting relations between Washington and Tehran back on track.

According to a State Department official, the United States has sought to keep the asset negotiations divorced from diplomatic considerations in an effort to keep the settlement process insulated from the ups and downs of US-Iranian relations. The official said US businessmen and bankers had received some $850 million in claims through the tribunal since 1981.

Questions have been raised about why the US would go to such lengths to circumvent its own arms embargo to make contact with moderate Iranians when there were existing channels that might have been used for the same purpose.

``What's been going on in The Hague is more important to the hostages than arms,'' the informed lawyer says.