The United States said Wednesday it was allowing Iran to use frozen funds to settle debts in South Korea and Japan, as talks drag on over reviving a nuclear deal that could see sanctions relief.

The United States maintains sweeping sanctions on the clerical regime, meaning that companies that deal with many bank accounts in Iran can face legal penalties in the world's largest economy.

The State Department said that it has been letting Japanese and South Korean companies receive payments from US-targeted Iranian accounts to pay for exports shipped before former president Donald Trump's administration started enforcing its toughest sanctions in 2019.

Secretary of State Antony Blinken had signed an earlier waiver and has extended it for 90 days as "these repayment transactions can sometimes be time-consuming," a State Department spokesperson said.

"To be clear: The waiver does not allow for the transfer of any funds to Iran."

The spokesperson said the goal of the waiver was to satisfy companies in Japan and South Korea, saluting the allies' "steadfast support for all US and UN sanctions."

Iranians shop for electronics from Japanese tech giant Sony at a Tehran mall in 2015 amid hopes for sanctions relief
Iranians shop for electronics from Japanese tech giant Sony at a Tehran mall in 2015 amid hopes for sanctions relief AFP / ATTA KENARE

South Korea and to a lesser extent Japan, both major tech exporters, hold billions of dollars in assets from Iran that have been stuck since Trump's sanctions.

South Korea said in April that it had resolved a dispute over $7 billion blocked from Iran but had been waiting for the US green light.

Japan, South Korea and other US partners, notably India, begrudgingly stopped buying oil from Iran after Trump imposed a unilateral embargo with threats to punish anyone who buys from Tehran.

Trump had vowed to bring Iran to its knees through maximum pressure after he walked out of an agreement negotiated by his predecessor Barack Obama under which Iran drastically scaled back nuclear work in return for promises of economic relief.

President Joe Biden favors returning to the 2015 accord, arguing that it was working and peacefully addressed a major security concern.

But EU-brokered indirect talks in Vienna have not yielded a breakthrough as Iran insists on an end to all sanctions, including measures taken over non-nuclear issues.