Kerry: Washington to Pay Iran $1.7bln in Debt, Interest

The repayment, which settles a suit brought under an international legal tribunal, is separate from the tens of billions of dollars in frozen foreign accounts that Iran can now access after the end of nuclear sanctions.

But the timing of the announcement, one day after the implementation of the Iran nuclear accord, will be seen as pointing to a broader clearing of the decks between the old foes, AFP reported.

US President Barack Obama defended the settlement in a televised statement from the White House, saying it was for "much less than the amount Iran sought."

"For the United States, the settlement could save us billions of dollars that could have been pursued by Iran. There was no benefit to the United States in dragging this out," he said.

Kerry said the claim was in the amount of a $400 million trust fund used by Iran to purchase military equipment from the United States prior to the break in diplomatic ties, plus $1.3 billion in interests.

Iranian-US ties broke down in 1979 after revolutionaries -- angered at US support for the Iran's deposed monarch -- stormed the American embassy and took hostages.

In 1981, the Iran-US Claims tribunal was established in The Hague to settle outstanding debts between the two countries, and Tehran filed a suit demanding the arms payment be returned.

Kerry described Sunday's payment of the 35-year-old trust as a "fair settlement."

Kerry, in defending the agreement, said that "Iran's recovery was fixed at a reasonable rate of interest and therefore Iran is unable to pursue a bigger tribunal award against us, preventing US taxpayers from being obligated to a larger amount of money."

He went on to say all of the US claims against Iran at the tribunal had long been settled and had netted American companies and individuals $2.5 billion.

But Kerry added there are more Iranian claims pending and that the United States would try to negotiate to resolve them.