Iran hikers - AP - September 12, 2010
In this May 20, 2010 file photo, American hikers Shane Bauer, left, Sarah Shourd, center, and Josh Fattal, sit at the Esteghlal Hotel in Tehran, Iran. Photo by AP
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Iran freed on Wednesday two U.S. men it jailed for over two years on espionage charges after $500,000 bail for each was paid by Oman, Reuters witnesses and diplomatic sources said.

Josh Fattal and Shane Bauer, who were arrested while hiking along the Iraq-Iran border in 2009 and denied being spies, left for Tehran's airport in a convoy escorted by Omani officials and including the ambassador of Switzerland, witnesses said.

The official news agency IRNA then said the two had flown out of the country, only to retract the report, with their lawyer denying that they had already departed.

"They have not left Iran yet ... We are still waiting at the airport for them to fly out of Iran," Masoud Shafie told Reuters at Mehrabad Airport.

IRNA said Fattal and Bauer expected to go first to Oman, a Gulf Arab kingdom whose officials helped secure their freedom.

Their release was flagged last week by President Mahmoud Ahmadinejad, saying it would be a "humanitarian" gesture ahead of his annual trip to the United Nations in New York, but their fate remained uncertain until the last minute.

Trying to divert attention from his fading standing in the Islamic Republic, Ahmadinejad told U.S. media last week the two U.S. citizens recently sentenced to eight years in prison for alleged espionage would be let go "in a couple of days".

But Iran's judiciary, controlled by rival conservative hardliners, immediately and publicly humiliated Ahmadinejad by ruling out any imminent release of Shane Bauer and Josh Fattal, highlighting the president's deepening credibility deficit.

Bauer and Fattal were arrested on July 31, 2009 near Iran's border with Iraq along with a third American, Sarah Shourd. The trio, in their late 20s and early 30s, said they were only on a hiking holiday at the time.

The two men were sentenced to eight years in prison last month. Shourd was released on $500,000 bail in September last year and allowed to fly home.

The U.S. government denied that the three Americans were spies and their supporters say that no evidence against them was ever made public. Their trial was held behind closed doors.

Some U.S. commentators said the bail money was more like ransom as all sides know there is little chance any of the three Americans will return to Iran to serve more jail time.
Iranian media had speculated that the Americans could be swapped for Iranian prisoners held in U.S. jails but there has been no report of any such arrangement in the United States.

With no diplomatic relations between Washington and Tehran since the 1979 Islamic Revolution, several countries tried to resolve the prolonged impasse over the jailed Americans.

In addition to the Omanis, Iraqi President Jalal Talabani also helped mediate, Iraqi officials said. The Swiss embassy, which represents U.S. interests in Iran, was also involved.

But the Swiss ambassador in the end was not allowed to enter Evin prison and had to wait in her car for their release.

The release was delayed twice, according to their lawyer, because a judge whose signature was required was away on vacation -- another hint that Ahmadinejad's rivals within the fractious ruling elite aimed to embarrass him.