Seven months after incurring the wrath of Washington -- and stiff economic sanctions -- by testing nuclear weapons, Pakistan received a welcome holiday gift this week from the Clinton administration: payment of an IOU worth $464 million, most of it in cash. The money was delivered to reimburse Pakistan for 28 F-16 combat jets it purchased a decade ago but never received. The shipment was blocked -- and the planes placed in escrow in the Arizona desert -- after President George Bush declined to certify that Pakistan was free of atomic weapons and Congress, concluding Pakistan had lied about its nuclear program, imposed restrictions on arms exports. President Clinton, who had publicly declared it "not right" for the United States to keep both the money and the aircraft, approved the payment during a visit by Pakistani Prime Minister Nawaz Sharif in early December. Administration officials portrayed the settlement as a creative response to a valid contractual claim, not a retreat from U.S. opposition to Pakistan's weapons program. Other sanctions imposed on Pakistan under U.S. laws aimed at curbing nuclear proliferation remain in effect, officials said, even though Clinton softened them after Pakistan promised to sign a treaty banning further nuclear tests. Resolution of the F-16 issue dispels a cloud that has hung over relations with Pakistan for years and reduced U.S. diplomatic leverage over the South Asian nation. "Undoubtedly, a major irritant in our relationship has been removed," said Pakistani Ambassador Riaz Khokhar. He credited Clinton for "a proposal that came straight from him," and expressed satisfaction that the settlement stipulated payment by Dec. 31 because "we need the cash." Pakistan is reportedly near default on its international debt and has only skimpy reserves of foreign currency. Pakistan would have preferred to take delivery of the planes, which it needs to bolster its defenses against India, Khokhar said, but recognized that "the sanctions are still there" to block it. The settlement, announced by the White House Dec. 21, ends one of the longest-running and most complicated disputes in U.S. foreign policy, a case that wove together issues of arms control, U.S. efforts to end the Soviet role in Afghanistan, congressional input into foreign policy and the nuclear standoff between Pakistan and India. According to a White House statement, $324.6 million of the settlement money came from a fund maintained by the Treasury Department to pay litigants who succeed, or would probably succeed, in court claims against the U.S. government. Lawyers for Pakistan, including former White House special counsel Lanny J. Davis of the Patton Boggs law firm, had threatened to sue by Feb. 1 if the Clinton administration did not settle the claim. Pakistan had long been reluctant to sue for fear of further damaging relations with Washington, but its lawyers determined that the statute of limitations on its claim would expire Feb. 1 and therefore Pakistan had to take legal action now, sources close to the case said. Justice Department officials said a payment from the Judgment Fund did not imply that the government was admitting any liability or assuming it would lose in court. Other sources, however, said the department had advised Clinton that Pakistan would probably prevail because documents showed that U.S. officials had put pressure on Pakistan to pay for the planes even when delivery was in doubt. By taking the money from the claims fund, the administration avoided the need to seek an appropriation from Congress. Lawmakers probably would have refused such a request. Many members believe Pakistan created the problem by deceiving Congress about its nuclear intentions and by paying for the planes, knowing that delivery might be blocked under a 1985 law known as the Pressler amendment. That law, named for former senator Larry Pressler (R-S.D.), provided for a cutoff of aid and military sales to Pakistan if the president was unable to certify that Pakistan was free of nuclear weapons. The United States had known since the early 1970s that Pakistan was seeking to develop nuclear weapons, which archrival India already had. But Presidents Ronald Reagan and George Bush, who wanted Pakistan's crucial help in opposing the Soviet occupation of Afghanistan, held off on a Pressler notification until after the 1989 Soviet withdrawal. In 1990, Bush notified Congress that he could not certify that Pakistan did not possess an explosive nuclear device. That triggered the Pressler amendment, cutting off delivery of the planes and other military equipment. Pakistan continued to make payments until 1993, however, for reasons that have never been fully explained. Some sources said Pakistan may have been responding to informal Pentagon assurances that the aircraft eventually would be delivered. Pakistan paid a total of $658 million. The money went to the Pentagon, which forwarded most of it to Lockheed Corp., now Lockheed Martin, manufacturer of the F-16. Lockheed spent the money to pay for manufacture of the aircraft. That created an impasse that lasted until the Clinton-Sharif meeting. Pakistan wanted the planes or its money back. The United States was prohibited from sending the planes and the money had been spent. The Pentagon sent the planes to an air base in Arizona and billed Pakistan $50,000 a month for their upkeep. Clinton took up the issue during a 1995 visit by Sharif's predecessor, Benazir Bhutto. She insisted that the issue was fairness -- the planes or the money -- and Clinton agreed. But the administration was unable to get around the Pressler amendment until the threat of a lawsuit opened access to the claims fund. Proposals to sell the planes to other countries, including the Philippines and Indonesia, fell through for various reasons, even though Pressler supported them at the time. In the fall of 1995, Congress approved a one-time modification of the Pressler amendment to allow delivery to Pakistan of some military equipment other than the F-16s. Those shipments and other adjustments to the bill reduced Pakistan's total claim to $463.7 million, the amount Clinton agreed to pay, according to the White House. In addition to the $324.6 million from the Judgment Fund, Clinton agreed to send Pakistan $60 million worth of wheat and to use all available means to find the rest. New Zealand has agreed to acquire the F-16s, in a 10-year lease-purchase deal that will reduce the cost of the settlement to U.S. taxpayers by $105 million.