Britain preparing to return £400m to Iran for 1970s arms deal

Britain is preparing to transfer over £400m ($527 million) to Iran as it seeks the release of a jailed Iranian-British aid worker, The Telegraph newspaper reported, citing unidentified British sources.

Nazanin Zaghari-Ratcliffe, a project manager with the Thomson Reuters Foundation, was sentenced to five years after being convicted by an Iranian court of plotting to overthrow the clerical establishment. She denies the charges.

Britain has sought legal advice over whether it could transfer the funds which it owes as a result of a disputed arms deal in the 1970s. Diplomats told the newspaper that any payment should not be linked to the fate of Zaghari-Ratcliffe.

The Thomson Reuters Foundation is a charity organisation that is independent of Thomson Reuters.

A spokesman for Britain's Foreign Office could not be reached for comment out of normal business hours but Senior Whitehall sources have told the Telegraph that the payment is not directly linked to the fate of Zaghari-Ratcliffe and that work has intensified in recent months in a bid to improve relations with Iran.

The Shah's tanks and vehicles

The Ministry of Defence announced in 2010 that it would return the money which was paid upfront by the former regime of the Shah of Iran for a huge consignment of tanks and support vehicles in the 1970s. After the Shah was overthrown as the Islamic Revolution swept through Iran in 1979, the contract was cancelled, but the British government refused to give the money back.

After a three-decade impasse at the arbitration court of the International Chamber of Commerce, Iran won a ruling in its favour in April 2009.

At the time of the ruling Britain vowed to “comply with UK and international law” but sanctions on Iran meant the money could not be directly transferred at the time.

Britain has yet to repay the money since the easing of sanctions following the Iranian nuclear deal in 2016, and Iranian officials have said they want it to be settled.

The husband of Nazanin Zaghari-Ratcliffe suggested that his wife’s detention is being used by the Tehran government in an attempt to get the British authorities to pay the money.

He said: “It is important that the UK honours its international legal obligations so that Iran can honour its legal obligations.

“They are separate things but it is good for the atmosphere if they are all solved.”

He had urged the government to grant Zaghari-Ratcliffe diplomatic protection after a “positive and constructive” meeting with Boris Johnson on Wednesday.

Johnson caused controversy last week by incorrectly claiming that Zaghari-Ratcliffe had been training journalists in Iran.