Under strong pressure from a federal judge in Miami, the Justice Department said yesterday it would move to release between $4.5 million and $6 million frozen in Manuel Antonio Noriega's foreign bank accounts so the former Panamanian dictator can pay his lawyers.

The agreement, worked out after intense negotiations, appears to resolve a protracted dispute that was threatening to derail Noriega's prosecution on drug trafficking charges. For the past two months, Noriega's lawyers have been threatening to withdraw from the case on grounds that the U.S. government has tied up all their client's money, leaving him "penniless" and unable to pay for his defense.

At the same time, the agreement permits the government to avoid potentially embarrassing disclosures over how much Noriega received from the Central Intelligence Agency and other intelligence agencies.

But the agreement immediately ran into a potential roadblack when Gregory Craig, a lawyer with the Washington firm of Williams & Connally who said he represented the Panamanian government and other private indviduals in Panama, objected. He told a court hearing that his clients had "interests that were broader than the interests of this court." Craig said later he plans to file a $5.3 billion lawsuit against Noriega, accusing him of racketeering, including murder, theft and fraud against the Panamanian people.

Frank Rubino, Noriega's chief lawyer, angrily protested Craig's objections, telling U.S. Judge William Hoeveler that "there are no interests that are bigger than the constitutional rights and defense" of his client. Hoeveler said he would take Craig's objections under consideration, but approved the agreement, calling it "the fair and right thing to do."

The compromise comes less than a week after Hoeveler dealt a major setback to the government by ordering prosecutors to justify their action freezing Noriega's money by presenting evidence that it was derived from illicit activity. "Certainly, the government has an interest in combating the drug epidemic which plagues this country," Hoeveler wrote in his order. "But this effort must never be at the expense of an accused's constitutional rights."

Justice Department officials, however, cautioned that the agreement to resolve the dispute would not automatically result in release of funds in Noriega's overseas accounts. Since the invasion of Panama in December by U.S. forces, at least $20 million in 27 bank accounts belonging to Noriega has been frozen by officials in Britain, Germany, Switzerland, Luxembourg, the Cayman Islands and other countries at the request of the Justice Department. Assistant U.S. Attorney Michael Sullivan told Hoeveler yesterday that the government would use its "best efforts" to have some of the money unfrozen. But officials noted that the best the U.S. government could do is formally request the foreign governments to undo what it asked them to do in December and January. One official noted that some of the countries had laws requiring seizure of suspect funds and "there is no assurance" that all the countries will comply.

Noriega's lawyers have also contended that the government had little choice but to back down since it would be unable to prove that most of Noriega's overseas funds came from drug trafficking and other illicit activity. The reason, they said, is that $11 million of the $20 million came from payments the former Panamanian strongman received from U.S. agenices.

A U.S. government source said the department now has a "handle" on how much Noriega was paid by U.S. agencies and that the figure used by Noriega's lawyers is "significantly overstated." The source declined to reveal the sum.

Last month, prosecutors and defense attorneys worked out a deal which called for the government to pay Noriega's legal bill, reimbursing his lawyers between $200 to $300 an hour. But that quickly collapsed when Hoeveler pointed out that the government is limited by law to paying no more than $75 an hour in attorney's fees.

Special correspondent Michael Malone contributed to this report from Miami.