TEHRAN, July 24: An Iranian court has cleared an intelligence agent accused of killing Iranian-Canadian photographer Zahra Kazemi while she was in custody, and the hardline judiciary has moved to close the case , the official news agency IRNA reported on Saturday.

The report quoted an official in the prosecution office as saying the agent, Mohammad Reza Aghdam Ahmadi, had been cleared due to a "lack of proof".

IRNA said that in the absence of a guilty verdict, the Iranian government had been ordered to pay "blood money" to Kazemi's family, and appeared to signal the courts would not be pursuing the case any further - a decision likely to further damage relations with Canada.

"If killer or killers could not be found, the diyeh (blood money) will be paid by the treasury," said the official, who was not named.

In Iran, blood money for a woman - half that for a man - amounts to 80 million rials, or around 9,200 dollars.

Kazemi's family, however, can appeal against the verdict, although it is not clear if that would result in another investigation to find the real killer.

Kazemi, a 54-year-old freelance photographer with dual nationality, died in July 2003 from a brain haemorrhage, the result of a blow to her skull inflicted while she was being interrogated.

She had been arrested for taking photos outside Tehran's notorious Evin prison, at the time packed with protestors who took part in last summer's wave of anti-regime demonstrations.

During his trial, the 42-year-old intelligence agent claimed he was a scapegoat and victim of Iran's complex internal rivalries. During two days of hearings last week, the judiciary was accused of covering up for one of its own officials.

The judiciary initially claimed Kazemi died of a stroke, but a government report later revealed she had been struck by a blunt object while being interrogated.

Between her arrest and her admission to hospital, she spent several days being shuttled between the custody of judicial prosecutors, the police and the intelligence ministry.

A team of lawyers led by Nobel Peace Prize winner Shirin Ebadi, who were representing Kazemi's enraged family, alleged in court that the real killer could have been Mohammad Bakhshi, a senior justice official working in Evin prison.-AFP