Other Germans are still being held, including a businessman arrested in 1989, accused of spying for Iraq.
The announcement comes amid continuing friction between London and Bonn over German contacts with Iran. Bernd Schmidbauer, a senior figure in the Chancellor's office, has had talks this month with Ali Fallahiyan, the Iranian minister responsible for security and intelligence services. The head of the German intelligence service also took part in some of the talks.
Britain had protested against the contacts, arguing it was unacceptable to invite Mr Fallahiyan, 'the man responsible for terrorism'. But Germany has refused to budge. Mr Schmidbauer - praised earlier this year for negotiating a peaceful end to a hostage- taking by Kurds in the Turkish embassy - insisted this week that the talks were over 'humanitarian questions'.
'The German government intends to continue with these humanitarian conversations, without regard to unjustified criticism, in the appropriate manner, and within the framework of a critical exchange of views with Iran,' Mr Schmidbauer said. With unusual bluntness, he described as 'false' the British argument that the talks were incompatible with decisions taken by the European Community at the Edinburgh summit in December 1992. 'On the contrary, it is explicit that a dialogue should be carried out with the Iranian government.'
The nature of that dialogue has been called into question by critics of the German policy. Three alleged Iranian agents are to go on trial for the murder of Iranian dissidents, with evidence linking the defendants to Tehran. Unsurprisingly, Mr Fallahiyan is keen to prevent such a trial, though it is unclear whether he can succeed in doing so. Germany has been less keen than France, say, to bend judicial rules for political convenience, in the prosecution of terrorist offences.
Britain appears to have backed off from its public complaints - though London is still unhappy at the German stance. Some British officials point out that there may not be malice aforethought on the German side, but merely a 'cultural difference'. They point out that in recent years the style of German diplomacy has emphasised the carrot more than the stick.
In the words of one German official, with reference to the Iran talks: 'We mustn't let the wires be cut.'
Germany and Britain are also keen that the issue of relations with Iran does not inflame the relationship between the two European allies. Both sides suggest that, in public, at least, the matter is now closed.