Britain has for the first time acknowledged it is trying to pay a debt to the Iranian government that could help secure the release of imprisoned dual nationals including Nazanin Zaghari-Ratcliffe.
The country's defence minister, Ben Wallace, told lawyers acting for the families of detainees that the government was looking for a way to pay the debt, according to a letter seen by The Guardian.
Britain is believed to owe around £400 million (Dh1.95 billion) for 1,500 Chieftain tanks ordered by the Shah of Iran before his overthrow in 1979.
Ms Zaghari-Ratcliffe, a British-Iranian dual citizen, has been detained in Tehran since 2016. Her family's lawyers have accused the government of delaying efforts to free her over fears of upsetting Washington.
Neither the UK or Iran have formally acknowledged that the release of dual nationals is linked to the payment of the historic debt. Iranian judges have raised the issue, however, and the payment is seen privately as the main roadblock to the prisoners’ release.
The delivery of the tanks was cancelled after the Iranian Revolution but the country’s new rulers demanded their money back.
Only 185 tanks were delivered to Iran by International Military Services (IMS), a subsidiary of the Ministry of Defence, before Britain banned arms exports to the country.
A decades-long legal battle ensued between lawyers for the Islamic Republic and the UK’s Ministry of Defence.
An international arbitration ruling in 2008 found that Britain did owe millions to Iran, but the UK government has not yet paid up.
The two sides continue to argue over the question of what interest has accrued in the decades since the deal fell through.
Sanctions imposed by both the United States and the European Union also complicate the matter, and possibly make any payment from Britain illegal.
In the letter, Mr Wallace confirmed the government was trying to resolve the tank debt.
“With regard to IMS Ltd and the outstanding legal dispute the government acknowledges there is a debt to be paid and continues to explore every legal avenue for the lawful discharge of that debt,” he wrote.
“I have previously stated my personal position and I remain committed to its resolution, but it would not be appropriate for me to comment further at this time.”
Mr Wallace had already voiced criticism to the government’s delay in settling the debt. In 2014, he said the government’s handling of the case was “un-British, double-dealing and obfuscatory”.
Ms Zaghari-Ratcliffe was charged with spying and trying to topple the Iranian establishment.
The Chieftain tank deal was the largest of more than 60 contracts that were cancelled by the UK in the wake of the Shah’s overthrow.