Britain is to pay back £400 million it has owed Iran since the Islamic revolution more than 30 years ago.
By Richard Spencer, Middle East Correspondent
The Iranian side cancelled the contract at the time of the revolution, but the British government said it could not have its money back.
After a case that has lingered for three decades at the arbitration court of the International Chamber of Commerce, Iran finally won a ruling in its favour in April last year. Since then, negotiations have been under way to arrange for the sum to be returned.
The original contract was worth £650 million, but only 185 of the 1,500 Chieftain tanks and 250 support vehicles ordered were supplied.
Some of the remainder were sold to Jordan – and some of the support vehicles to Iraq, where they were used against Iran in the eight year-long war between the two.
Whitehall says International Military Services Ltd (IMS), the government subsidiary that arranged the deal, is now waiting for Iran to apply for the return of the funds.
"The dispute between International Military Services Ltd and Iran relates to contracts signed in the 1970s with the pre-revolution Iranian regime," a Ministry of Defence spokeswoman said yesterday.
"IMS is a private limited company but is owned by the Government. It is rightly subject to, and will comply with, UK and international law." It is unclear why, a year on, the Iranians have not yet applied for the cash. The Iranian side has yet to make a comment.
But one immediate reason is that even if they do, the cash will not be transferred straight to Iran. It will join Pounds 976 million of Iranian assets that have been frozen in a special account in Britain by European Union sanctions since the revolution.
Officials say the loss of the money will not affect Britain's already large budget deficit. In 2002, the government lodged £486 million with the High Court pending judgement – in excess of the £390 million that seems set to be repaid.
