The day before the Obama administration was due to slap new sanctions on Iran late last month, Iranian Foreign Minister Javad Zarif warned U.S. Secretary of State John Kerry the move could derail a prisoner deal the two sides had been negotiating in secret for months.
Kerry and other top aides to President Barack Obama, who was vacationing in Hawaii, convened a series of conference calls and concluded they could not risk losing the chance to free Americans held by Tehran.
At the last minute, the Obama administration officials decided to delay a package of limited and targeted sanctions intended to penalize Iran for recent test-firings of a ballistic missile capable of delivering a nuclear warhead.
This account of previously unreported internal deliberations was provided by two people with knowledge of the matter.
A third official said Obama had approved the decision to delay the sanctions.
Those unilateral U.S. sanctions are expected to be imposed quickly now after Iran freed five Americans, including Washington Post journalist Jason Rezaian, on Saturday. Eight Iranians accused in the United States of sanctions violations were having charges dropped or sentences commuted on Saturday under the complex prisoner deal, according to court filings and sources familiar with the cases.
The moves came as broader U.S. and international sanctions were set to be lifted after verification that it had met commitments to curb its nuclear program.
But Kerry's decision not to call Iran's bluff in December shows how months of clandestine negotiations to free Rezaian and other Americans became deeply intertwined with the final push to implement the nuclear deal, despite the official U.S. line that those efforts were separate.
A U.S. official said on Saturday there was no connection between the nuclear deal and the release of the Americans.
The prisoner swap could also come under scrutiny from critics who have questioned the Obama administration's resolve in dealing with Iran and ability to follow through on its pledge to keep a hard line on sanctions outside those imposed on its nuclear program.
The episode was one of several diplomatic and military near misses between Iran and the United States in recent weeks, including a quickly defused crisis when 10 U.S. sailors were detained after entering Iranian waters.