Humanitarian hostages

Iranian officials say the prisoners were released as a humanitarian gesture, even if public opinion in Iran and abroad may not likely associate this regime with humanitarianism. Iran began dabbling in hostage-taking for extortion in Lebanon, soon after the 1979 revolution in Iran.

That would also solve Iran's economic problems.

A former Iranian Revolutionary guards chief, Muhsin Rezai, warned during talks leading to the first nuclear agreement between Iran, the U.S. and allied countries in mid-2015, that if the U.S. were to attack, Iran would take 1,000 Americans hostage the very first week, and ask for a few billion dollars for each. That, he said, would also solve Iran's economic problems.

Vox describes the new hostage deal as a money-making enterprise for cash-strapped Iran. As the analyst Aaron David Miller observed in Foreign Policy on August 14, there are no good deals with Iran while the Islamic Republic is in power.

Seven years ago, when the government of President Hasan Rouhani held similar, secret talks with U.S. officials, just the rumors around them had a positive effect on Iran's currency and money markets. Not so today, amid a generalized despondency among Iranians and their deep-seated distrust of anything said by the regime and the Biden administration. So how much of an economic break can this deal give Iran?

Funds unfrozen, then wasted

A week after the prisoners were moved to a hotel, the German central bank became involved as its branch in Switzerland is to be the first place to receive the $6 billion blocked in South Korea. These must be converted from won to euro, then sent to banks in Qatar or Oman.

That means, part of the money, possibly as much as one billion dollars, will be lost in the exchange — South Korea's currency has recently lost value — and transfers. Some Iranian officials have said Iran can then access the money, though U.S. officials insist Iran will not be handling its cash, which can only be spent on essential consumer goods and under U.S. supervision.

Few people in Iran are giving the deal a thought as they expect no benefits and trust neither side in the deal. They already feel the funds will just melt away, like those Iran recovered on the back of the 2015 nuclear pact. This may be why Iranian President Ibrahim Raisi recently insisted this money would be used to boost production in Iran.

Not Even 'Magic Funds' Could Help

It is not clear how much money Iran has frozen in foreign banks. Iranian officials say it is $23 billion, and are hailing the deal, if it goes through, as a diplomatic victory and sign of Iran's clout.

But even official and semi-official economists in Iran doubt this could aid an economy battered by decades of "revolutionary" interventionism and hostility to the free market, electoral fraud, confiscations, cronyism and likely massive thefts and embezzlement.

The problem of Iran's economy is rooted in politics and ideology.

And that is even if the entire $23 billion or four times as much were unfrozen and duly spent inside Iran, and not to finance terrorists, rockets and regional militias.

The problem of Iran's economy is rooted in politics and ideology. Its debts and needs are off the charts. Iran owes the IMF around U.S. $112 billion. The parliamentary research office says the oil and gas sector needs $100 billion's worth of upgrading and investments. The head of the state railways is asking for $25 billion. The electricity grid needs its own $25 billion, according to a deputy-energy minister. The government owes the state forex reserves fund $74 billion. Astronomical sums have been cited as the amount of money Iran has sunk into Syria's civil war. No amount of hostage-taking could fix this.

Iranian activists and exiles have repeatedly warned Western states that secretive deals with the Islamic Republic only embolden it to intensify repression at home and spread its tentacles abroad.

The Biden administration has sought to balance its appeasement of Tehran with a firm gesture — sending 3,000 Marines to the region — which is meant to be taken as a warning in Tehran over its good conduct. The administration thus wants to send a signal to baffled observers: that it knows what it is doing. It has the situation in hand.