American forces in Iraq have released five Iranian officials detained in the north of the country more than two years ago, removing a major source of friction between Tehran and Washington.

Iran has always insisted that the men were diplomats but US officials said at the time of their detention that they included the operations chief and other members of Iran's elite Quds force, which was accused of arming local Shia militia groups and inciting attacks against US forces.

Hoshyar Zebari, the Iraqi Foreign Minister, said the five men were handed over to the Government this morning under a security accord which lays out the terms for the US pullout from Iraq and the transfer of prisoners in US custody.

“This process is taking place today and includes the Iranian officials arrested in Arbil,” he said.

The US military, which has long accused Iran of funding and equipping Shia insurgents in Iraq, had arrested the five at an office in the Kurdish city on January 11, 2007.

There was no immediate confirmation of their release from the US side, but Iranian officials said the men would be handed over to the Iranian embassy after a meeting with Nouri al-Maliki, the Iraqi Prime Minister.

An Iranian foreign ministry spokesman, Hassan Ghashghavi, said the five had been handed over in Baghdad at 0730 GMT. “They called their families from there. They are in good health.

They will be handed over to our embassy within hours,” he said. “They were innocent and arrested against all international regulations under the Vienna convention,” Mr Ghashghavi said, referring to the international treaty on privileges and immunity for diplomatic missions.

The five Iranians were identified by Iran’s state broadcaster as Mohsen Bagheri, Mahmoud Farhadi Majid Ghaemi, Majid Dagheri and Abbas Jami. Their detention has long been an added bone of contention in US-Iran relations although it was unclear whether the decision to release them was connected with wider diplomatic manoeuvring.

Soon after taking office in January, President Obama called on Iran to "unclench" its fist after three decades of severed ties and years of international tensions over Tehran’s nuclear drive.

But relations took a turn for the worse again after the Iranian authorities cracked down on massive public protests over the disputed re-election of President Ahmadinejad last month.

In Tehran today, the French ambassador was allowed to meet a French student held in the notorious Evin prison on charges of espionage, the AFP news agency reported.

Clotilde Reiss, a 23-year-old politics student and assistant lecturer, was arrested on July 1 at Tehran airport as she was leaving the country after a five-month stint. She was accused of spying over photographs she had taken during a post-election demonstration.

A diplomatic source said that the ambassador, Bernard Poletti, met Ms Reiss at the prison for around 40 minutes. “She is in good physical condition and seems to be treated well. But she is rather preoccupied with what will happen next,” the source said.

The Iranian nuclear issue was discussed yesterday at the Group of Eight summit in Italy, where the G8 leaders agreed to give Tehran until September to accept negotiations over its nuclear ambitions or face tougher sanctions.

Upping the stakes in a dispute with Tehran, President Sarkozy of France said the G8 nations would review the situation at a G20 meeting in Pittsburgh on September 24-25.

Briefing reporters after the opening day of the summit in the earthquake-hit city of L'Aquila, Mr Sarkozy made clear that Russia was still dragging its feet on the issue and had pushed for more time before considering a fresh round of sanctions.

“We made an effort to agree not to strengthen sanctions straightaway in order to bring everyone on board. The more reserved amongst us agreed that Pittsburgh was the time for decisions,” Mr Sarkozy said.

In a separate statement, the G8 said it was committed to finding a diplomatic solution to Iran’s nuclear programme. “We sincerely hope that Iran will seize this opportunity to give diplomacy a chance,” it said.

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