The Obama administration is facing criticism for paying Iran $1.7 billion in taxpayer funds as part of what critics described as a "ransom" bound up in a controversial hostage trade designed to secure the release of five Americans long held by Iran, according to conversations with administration officials and experts critical of the agreement.

The administration denies the issues are tied and insists that the money was provided to settle a decades-old dispute with Iran over the United States’ refusal to make good on a deal to provide the country military equipment following the 1979 Islamic revolution.

Under the terms of the settlement, Iran will be paid a $400 million balance, plus an additional $1.3 billion in interest from the taxpayer fund, according to a State Department official.

Senior officials from the State Department and White House National Security Council confirmed to the Washington Free Beacon that to settle outstanding legal disputes with Iran, the administration tapped into the Treasury Department’s Judgment Fund, a federal account that has been used by the executive branch to settle international legal claims.

The settlement was reached independently from the recently implemented nuclear deal and is separate from the $150 billion in unfrozen cash assets the United States is obligated to give to the Islamic Republic under the agreement, administration officials explained to the Free Beacon.

The payment came just prior to the release by Iran of five U.S. prisoners, prompting claims from some that the $1.7 billion was a ransom payment. Senior officials in Iran have said the money was provided as part of the prisoner swap.

A senior Iranian military commander said Wednesday that the cash settlement was reached as a perk to motivate Iranian authorities to free the imprisoned Americans, who were released over the weekend.

"The annulment of sanctions against Iran’s Bank Sepah and reclaiming of $1.7bln of Iran’s frozen assets after 36 years showed that the US doesn’t understand anything but the language of force," Mohammad Reza Naqdi, the commander of Iran’s volunteer Basij forces, told the country’s state-controlled press.

"This money was returned for the freedom of the U.S. spy and it was not related to the [nuclear] negotiations," he said.

Administration officials who spoke to the Free Beacon denied this characterization, saying that the settlement was reached outside of the nuclear agreement and not directly tied to Iran’s release of the five imprisoned Americans.

They also characterized the sum of $1.7 billion as a win for the United States since Iran sought larger amounts of interest.

With "each passing day we would've owed more interest," Ned Price, spokesman for the White House’s National Security Council, told the Free Beacon via Twitter. "The sooner we settled, the better."

The latest cash award is "not related to the [Joint Comprehensive Plan of Agreement] or to the release of the U.S. citizens from Iran," said a State Department official who was not authorized to speak on record.

"The claim that was settled is part of a much larger case involving Iran’s claims arising out of the former Foreign Military Sales program Iran had with the United States in the 1970s," the official said. "A large number of claims remain to be resolved at the Claims Tribunal, and this settlement regarding the Trust Fund is one in a series of claims settlements we have been discussing over the last two years."

The legal settlement with Iran remains "in the interests of the United States," the official said.

"In constructive bilateral talks, we were able to reach a fair settlement that is unquestionably in the interests of the United States given our litigation risk for this claim," the official said. "Settlement discussions will continue on remaining unsettled claims."

Critics of the agreement slammed the administration for using taxpayer dollars to appease Iran.

Lee Smith, a Middle East analyst and columnist for the Weekly Standard, accused the White House of paying for Iranian crimes against Americans.

The administration not only paid the settlement but also paid judgments against Iran awarded to U.S. victims of the country’s terrorist operation, Smith told the Free Beacon.

"The Iranian are not paying anything" as a result of these judgments, Smith said. "If they’re not paying anything, then where are the claims coming from?"

"The Iranians are not paying this," Smith said. "We’re paying twice. We’re paying for that."

"Obama officials are the last people on earth who are pretending that the $1.7 billion wasn’t a ransom payment," one foreign policy consultant who has worked with Congress on the nuclear deal told the Free Beacon. "Everyone else knows what happened, which is that we rewarded Iranian hostage takers. The hostage takers certainly aren’t fooled, which is why they’re already looking for more Americans to kidnap. They need to restock."

There remain outstanding legal claims against the United States by Iran, meaning that future payments could be made as a result of any resulting settlement, according to administration officials.

Meanwhile, Secretary of State John Kerry said money from the Iran deal could end up in the hands of Iran’s Islamic Revolutionary Guard Corps.

"I think that some of [the $55 billion] will end up in the hands of the IRGC or of other entities, some of which are labeled terrorists," Kerry said.