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.

"They (the 32) have been authorized to leave the country, but the ship will remain ... until there is agreement on payment of a fine," Tomas Cabal, the ministry's official for anti-terror analysis

Panamanian authorities seized the Chong Chon Gang July 10 after discovering 25 shipping containers of Cuban military hardware, including two MiG-21 fighters, concealed in a cargo of sugar.

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

And the Panama Canal Authority said the ship was fined a million dollars for endangering the strategic waterway.

Panama charges that the shipment violated the UN arms embargo against North Korea.

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

The communist allies did not explain why the items were buried under more than 200,000 sacks of sugar inside the ship.

In August, the Panamanian government said the United Nations had determined that the shipment violated sanctions against arms transfers to North Korea.