The United Kingdom may repay Iran for undelivered military hardware sold to Iran during the reign of its last Shah in the not-too-distant future. By doing so, Britain will be following in the footsteps of the United States, which, during the Obama administration, also repaid Iran for undelivered weapons systems from the same period.

Britain sold Iran Chieftain main battle tanks, which were the most advanced tank in the British arsenal at that time, back in the 1970s.

The Shah’s Iran made a fortune in the wake of the 1973 oil crisis and the dramatic rise in the world price of oil. He scrambled to make the Iranian military the most powerful in the region and made an advanced payment for over 1,500 Chieftain tanks. Iran ultimately only received a comparably paltry 185 of the tanks.

Britain was happy to sell the Shah such large quantities of advanced military hardware since it helped pay for its expensive oil imports.

“In order to offset the revenues that we were having to put out in order to purchase oil, and a lot of it Iranian oil, we needed offset arrangements, and he [the Shah] was ready and wanted to buy British military equipment,” explained Britain’s then-Foreign Secretary David Owen in a BBC documentary.

“So we were in the market for trying to sell the maximum amount we could to him, and [we found it] particularly important to sell him tanks.” 

Britain refused to deliver the tanks to the Islamic Republic regime that replaced the Shah’s regime and also never returned the advance payments the Shah had made for them. Britain is estimated to owe Iran at least £400 million (approximately $520 million) for the undelivered armor.

The debt recently made the news when Britain Defense Minister Ben Wallace said the British government is actively looking into ways to repay Iran. Wallace has long been adamant that Britain should honor this debt, going so far as saying in 2014 that not settling the case is “un-British, double-dealing and obfuscatory.” 

London may find it difficult to give Tehran back its money since it could constitute a major violation of U.S. economic sanctions against Iran, which have become much harsher under the incumbent Trump administration. If Joe Biden wins the 2020 U.S. presidential elections, on the other hand, London may find it significantly less challenging to settle the issue.

Some suspect there is linkage between the continued imprisonment of dual national British-Iranians by Tehran, most notably Nazanin Zaghari-Ratcliffe, who has been in jail in Iran since 2016, and the repayment of this historic debt. Wallace mentioned the debt issue while talking to lawyers representing those detained British-Iranians.

Both Iran and the United Kingdom have repeatedly denied that there is any connection between the two issues.

However, former foreign secretary Jeremy Hunt did say that: “If Nazanin is released soon I believe this acknowledgement of our historic debt will have played an important part.”

There was similar speculation in 2016 that the release of imprisoned Americans in Tehran was somehow linked to the return of money Iran paid for arms that it never received.

In January 2016, the U.S. secretly delivered $400 million worth of cash (which had been converted to other currencies) via plane to Tehran. That delivery directly coincided with the release of five Americans, including Washington Post reporter Jason Rezaian.

When the Wall Street Journal broke the story the following August, Republican opponents of the Obama administration accused it of paying Tehran ransom money. In reality, the U.S. and Iran agreed to trade prisoners with the U.S. also releasing seven Iranians it had held at the time for violating American sanctions on Iran.

The U.S. repayment of that debt was in someways similar to the ongoing Chieftain debt issue. It was Iran’s money and a payment the Shah had made in advance for arms in the 1970s that weren’t delivered before the revolution. The U.S. government refused to return it to the Islamic Republic, which had become its adversary in light of the Iran hostage crisis when 52 Americans were infamously held hostage in the U.S. embassy in Tehran for 444 days.

The Shah’s Iran was the only country the U.S. ever sold F-14 Tomcat air superiority fighter jets, arguably the best and most sophisticated fighter jet in the world at the time, to. The Shah purchased 80, giving the Grumman Corporation a timely injection of much-needed capital, and took delivery of 79 before the revolution.

On top of that multi-billion dollar deal, the Shah also wanted as many as 300 F-16s and ordered 160. The Iranian ruler even offered to fund the development of the F-18 Hornet fighter so the U.S. could build a land-based variant of that navy jet, dubbed the F-18L, for Iran. The Shah wanted to buy 250.

Ultimately, not a single F-16 was delivered to Iran.

After the implementation of the nuclear deal between Iran and the P5+1 countries (the five permanent members of the United Nations Security Council and Germany) in 2015, Washington and Tehran agreed to settle their debt issue through two U.S. payments, the original $400 million and an additional $1.3 billion in interest. Washington paid the full $1.7 billion.

London and Tehran may well work out a similar arrangement in the near future if Wallace can successfully arrange a deal that will finally put this four-decade-old dispute behind them.

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