Top Iranian officials apparently fail to understand -- and certainly do not accept --cannot legally comply with Tehran's latest demands on the hostage issue.
"We had been under the impression," said Secretary of State Edmund S. Muskie, "that they understood [the legal limits] beyond which the President cannot go."
The latest Iranian demand -- transfer by the United States of $24 billion to Algeria's central bank -- said Mr. Muskie Dec. 21 on "Meet the Press" (NBC-TV), would "require actions beyond the power of the President to respond."
Nonetheless, he added, "we are within reach of a solution . . . if they could but see it."
However, making the Iranians understand this, he said, was so complicated that it would be "very difficult" to obtain release of the 52 American hostages before the end of the Carter administration.
Muskie appeared to rule out military action by the US, at least under President Carter, noting that a previous effort had failed, "prolonging the agony of the problem."
Even if Washington agreed, which it does not, that the US controls $24 billion worth of frozen Iranian assets, neither Jimmy Carter nor Ronald Reagan could move that money to the Algerian central bank in Algiers.
More than 300 US firms and banks have taken their financial claims against Iran to US courts. Some judges already have blocked withdrawal of frozen assets until the American claims are settled.
Beyond this, no provision of US law would allow the President to seize the late Shah's fortune -- or that part of it deposited or invested in American institutions -- even if Washington knew the extent of the monarch's holdings.
Muskie denies that the Carter administration is simply bowing out and passing the whole hostage issue over to President-elect Reagan.
Nonetheless, given the gulf that appears to separate the US and Iran on conditions for the hostages' release, no early end to the crisis is in sight.
The fate of the American captives -- "illegally taken more than a year ago, illegally held" -- is "not separable" from overall US national interests, according to Muskie. "To permit Iran to jeopardize their lives would be contrary to American interests."
Following are some of the major issues involved in the tug of war between the governments of Iran and the United States:
Tehran's demand that the US transfer $24 billion to Algiers apparently breaks down to roughly $14 billion in various frozen official Iranian assets and $10 billion as a kind of guarantee that the Shah's wealth eventually will be returned.
If the US were to locate a particular holding of the late ruler, Iran would withdraw an equivalent amount from the Algiers account. The US then might be required by Iran to top up the Algiers account to the original $10 billion.
US officials indicate that the total of frozen assets is close to $11 billion , not $14 billion, of which perhaps $6 billion is locked into pending court actions.
On his own, the President could unfreeze the assets and return to Iran that portion not involved in litigation. For the rest, years might roll by while the courts wrestled with claims.
Under the doctrine of sovereign immunity, according to Iran's lawyers, assets owned by a government or central bank cannot be subject to private claims.
Even if this doctrine were found to apply, suits by the claimants might tie up the unfrozen assets and prevent their return.
Some Iranian officials acknowledge that some of the US claims are justified, such as those involving American equipment delivered but unpaid for by Iran at the time the assets were frozen by President Carter on Nov. 14, 1979.