Washington CNN  — 

As the Obama administration welcomed the implementation of a major nuclear deal with Iran on Saturday, it also prepared to close the book on another long-standing issue between the two countries: a decades old legal claim.

The U.S. State Department announced the government had agreed to pay Iran $1.7 billion to settle a case related to the sale of military equipment prior to the Iranian revolution, according to a statement issued on Sunday.

Iran had set up a $400 million trust fund for such purchases, which was frozen along with diplomatic relations in 1979. In settling the claim, which had been tied up at the Hague Tribunal since 1981, the U.S. is returning the money in the fund along with “a roughly $1.3 billion compromise on the interest,” the statement said.

“Clearly, it’s in the U.S. interest to resolve these (claims) in ways that reduce our risk,” a senior administration official told reporters in a conference call. “And we believe that this is a very positive settlement for us.”

Another official said discussions on this claim had occurred in “fits and starts for three decades,” and that the settlement, “reduced a significant risk of liability.”

The settlement comes as the U.S. is unfreezing a much larger pool of Iranian assets, estimated at between $100-$150 billion, as part of the nuclear deal.

While U.S. officials say Iran will only pocket about $50 billion of those assets after legal claims, the announcement of this new settlement could add fuel to the fire for critics who say the U.S. is funding a destructive regime.

Administration officials dismissed that notion, suggesting U.S. taxpayers might have faced a much larger payout if the case hadn’t been settled between the parties.

The announcement of this action comes as the U.S. is imposing new sanction on Iran over ballistic missile testing, and just one day after a deal was announced to exchange four imprisoned American citizens for seven Iranians in U.S. detention.