London high court ruling on British tank debt interest further sours Iran relations

The case is fraught with tension around the release of Nazanin Zaghari-Ratcliffe

epa07680221 Richard Ratcliffe, the husband of imprisoned Nazanin Zaghari-Ratcliffe poses for a portrait outside the Iranian Embassy in London, Britain, 28 June 2019. Nazanin Zaghari-Ratcliffe has begun a new hunger strike in the Iranian jail. Zaghari-Ratcliffe was jailed for five years in Iran in 2016 after being convicted of spying, which she denies. Mr Ratcliffe is currently on day 14 of his hunger strike in solidarity with his wife.  EPA/WILL OLIVER
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British-Iranian relations took another hit this week when a London high court ruled that the UK does not have to pay at least £20 million (Dh 91.3m) in interest on the £387m it owes to Iran over the cancelled sale of Chieftain tanks in the 1970s.

English High Court Judge Stephen Phillips ruled that the debt, which accumulated over a decade, didn’t have to be paid back to Tehran because it was accrued when it was under sanctions. Furthermore, the court ruled it wasn’t clear whether there is a body the UK can pay without breaching sanctions.

Many believe that the debt is a vital bargaining tool for the release of Nazanin Zaghari-Ratcliffe, the British-Iranian dual national who is imprisoned in Tehran, although this has not been confirmed by either party.

In February 2018, the team of British Prime Minister Boris Johnson, then Foreign Secretary, told The Sun newspaper the debt would be paid to Iran, but disagreements in parliament meant the cash was never handed over. The comments were made after a meeting between Mr Johnson and Richard Ratcliffe, Ms Zaghari-Ratcliffe’s husband.

The UK not handing over the money reportedly made Iran foreign minister Javad Zarif so furious that he washed his hands of the Zaghari-Ratcliffe case.

However, British officials have been keen to downplay the case that is fraught with tension around the release of the British-Iranian national, saying the cases are unrelated and emphasising that both parties made that clear during the court proceedings, which have lasted for many decades.

Asked about the case, a spokesperson for the British Ministry of Defence (MoD) told The National: "This is a longstanding commercial dispute about contracts signed over 40 years ago with the Iranian regime pre-revolution. While legal proceedings continue, it would be inappropriate to comment further."

The initial dispute involved a 1970s defence deal between the Iranian defence ministry and the International Military Services (IMS), a company majority owned by the MoD and minority owned by Britain's economic and finance ministry.

IMS has sought to resolve the long-running dispute over many years by trying to identify a solution that does not offend sanctions.

The company agreed in 1971 to sell the Shah of Iran 1,5000 Chieftain tanks and armoured vehicles but the contracts were cancelled in 1979 after the shah was disposed in a revolution.

Iran had already paid for the undelivered tanks and demanded its money back.

In his first few days as leader, Mr Johnson has come under pressure to use his first days in office to work for the release of Ms Zaghari-Ratcliffe, while he tries to balance the British relations with Iran after two oil tankers were seized off the coast of Gibraltar and in the Strait of Hormuz.

On Thursday, Britain announced that it will use warships to escort all of its vessels through the Strait of Hormuz after the Stena Impero ship was seized in the vital chokepoint last Friday.

Sanam Vakil, senior research fellow, of Chatham House’s Middle East and North Africa programme, said the seizure of the British ship “was in part a piece of theatre intended to appease domestic clamour for Tehran to assert itself.”