Panama will release 32 of 35 North Korean sailors detained for carrying undeclared Cuban arms as their ship was about to transit the Panama Canal, the foreign ministry said Wednesday.

Panamanian authorities seized the North Korean ship Chong Chon Gang on July 10 after discovering 25 shipping containers of Cuban military hardware, including two MiG-21 fighter jets, concealed in a sugar shipment.

Crew members face up to 12 years in prison if convicted on arms trafficking charges, according to prosecutors.

The group has been "authorized to leave the country, but the ship will remain ... until there is agreement on payment of a fine," said the ministry's anti-terrorism chief Tomas Cabal.

Organized crime prosecutor Nathaniel Murgas later said that the ship was no longer technically being held by Panamanian authorities, but that it still could not be moved until the fine was paid.

The Panama Canal Authority said the ship was fined $1 million for endangering the strategic waterway.

Both Cuba and North Korea had said that they were "obsolete" Cuban arms being shipped to North Korea for refurbishment under a legitimate contract.

AFP