UNITED NATIONS — Secretary of State George P. Shultz said Friday that the United States is ready for direct diplomatic contacts with Iran, but only to underline Washington's longstanding demand for an end to the Iran-Iraq War, a halt in Tehran's support for terrorism and the release of Western hostages in Lebanon.
Appearing at a news conference a few minutes after Britain announced that it is restoring full diplomatic relations with Iran, Shultz said there is increasing evidence that Tehran wants to end its diplomatic isolation.
At the same time, President Reagan, campaigning in Chicago for Vice President George Bush, repeatedly denied a report in an Israeli newspaper that the United States had made a secret deal with Iran to provide aid and arms in exchange for the release of nine American and British hostages.
"We are not negotiating directly with Iran," Reagan told reporters as he arrived at O'Hare International Airport. "We have not talked to the kidnapers. I think maybe Iran is putting these stories out."
The report of the hostages' imminent release appeared in The Nation, a new English-language newspaper in Jerusalem. It quoted unidentified sources in Geneva as saying that five American hostages held by pro-Iranian Lebanese Shia Muslims are to be released with Tehran's help about next Friday. Three other Americans and a Briton, possibly Anglican envoy Terry Waite, are to be freed a week later, the paper said.
17 Still Being Held
Seventeen foreign hostages are believed held in Lebanon, including nine Americans. The newspaper report said the United States put aside its demand that Tehran help free Marine Lt. Col. William R. Higgins, one of the nine, because officials became convinced that Iran does not control the kidnapers holding him.
Agreement on the restoration of full diplomatic relations between London and Tehran was reached in New York following a meeting between British Foreign Minister Geoffrey Howe and his Iranian counterpart, Ali Akbar Velayati. Both men were in New York for the opening session of the U.N. General Assembly. They said lower-level talks had been scheduled in Geneva to work out the details.
"Both sides have decided to resume full diplomatic representation on the basis of reciprocity and mutual respect," the British government said in a formal statement.
Britain reduced its relations with Iran to caretaker status in June, 1987, after one of its diplomats in Tehran was abducted and beaten, apparently in reprisal for the arrest of an Iranian consular official in Britain on a charge of shoplifting.
There was no formal break, but relations were severely strained. Only the Iranian charge d'affaires was permitted to stay on in London, and British interests in Iran have been looked after by the Swedish Embassy.
The United States severed relations with Iran in April, 1980, in connection with the seizure of hostages at the U.S. Embassy in Tehran in November, 1979.
Shultz said Friday that "we are prepared, and have been, to have direct talks" with Iran. But no such talks are planned, he said, and if they should take place, the United States would put the Persian Gulf War, terrorism and the hostage situation at the top of the agenda.
Both Shultz and Velayati will be at the United Nations again next week, but Shultz said he has no plans to meet with the Iranian foreign minister.
Movement by Iran Cited
Referring to recent developments in Iran, Shultz said: "There has been movement in the situation in a direction that we find very good. If there are further moves, we will be ready."
As examples of positive trends, Shultz cited the month-old cease-fire between Iran and Iraq and Tehran's resumption of diplomatic relations with London.
"There does seem to be evidence that Iran wants to see itself moving into more normal diplomatic relations around the world," Shultz said.
Meanwhile, Velayati and Iraqi Foreign Minister Tarik Aziz met separately with U.N. Secretary General Javier Perez de Cuellar to resume the peace talks that were suspended last month in Geneva. The meetings Friday were intended to set the stage for direct talks scheduled for today.
Aziz had said earlier that Iraq is not prepared for substantive negotiations in New York. Iraq wants the talks returned to Geneva.
Aziz met Friday with Arab foreign ministers but, according to an Arab source, did not spell out Iraq's strategy for the peace talks because a Syrian representative was present. Syria was Iran's only Arab ally in the eight-year conflict.