President Reagan agreed Tuesday to return $454 million in previously frozen assets to Iran, effectively ending six years of negotiations over Iranian money impounded at the time Iran seized the U.S. Embassy in Tehran.

State Department spokesman Charles Redman said the funds will probably be transferred sometime today under an arbitration ruling handed down last week by the special U.S.-Iran claims tribunal in The Hague.

Redman said that $66 million will be retained to cover outstanding claims against the Iranian government.

The action completes the distribution of $3.66 billion in Iranian funds that were frozen after the embassy was seized on Nov. 4, 1979. The rest of the money was allocated earlier to settle specific debts that had been left unpaid when the two nations effectively severed diplomatic and commercial relations.


Iran and the United States agreed to submit the dispute to arbitration in 1981 when Iran freed 52 American hostages after 444 days of captivity. The panel consisted of three American judges, three Iranian judges and three neutral judges selected by the other six. Decisions of the tribunal are not subject to appeal, but there is no enforcement procedure, so it was up to Reagan to decide whether to comply with the order.

Shortly after it was revealed last November that the United States had sold arms to Iran in exchange for Iranian efforts to free American hostages held in Lebanon, Hashemi Rafsanjani, Speaker of the Iranian Parliament, said Iran would try to win the release of other hostages if the United States returned all frozen Iranian assets that the Tehran government needed to help finance its war with Iraq.

The U.S. government balked at Rafsanjani’s demands because Washington was unwilling to appear to be paying ransom for the hostages. The claims tribunal eventually solved that dispute by spelling out in its order that the payments were not linked to the hostages or to any other political question.

At the time the tribunal issued its order May 5, the Iranian funds were put at $451.4 million. A little more than a week of interest payments pushed the total to the $454 million figure, which Reagan agreed to return.