Iran and Russia at odds over missile deal

Moscow warns Iran to quit $4bn lawsuit over failed deal to deliver systems that can detect and destroy missiles and low -flying aircraft or lose its support.

A Russian surface-to-air missile system S-300 PMU2 Favorit rolls during a rehearsal of the Victory Day Parade in Alabino, outside Moscow.

A long-simmering but little-publicised dispute is heating up between Iran and Russia over Moscow's refusal to supply Tehran with sophisticated missiles that would complicate any Israeli or US attempt to attack Iran's nuclear facilities.

Iran resents that Russia, a nominal ally, pulled the plug two years ago on an US$800 million (Dh2.93 billion) deal to deliver five S-300 air defence systems, which can detect and destroy missiles and low-flying aircraft.

Russia is furious that Iran slapped it with a breach-of-contract lawsuit for $4bn, an amount equivalent to almost a third of the country's annual arms sales.

The row escalated last week when a Russian official warned that Moscow would take a tougher stand against Iran's nuclear programme unless Tehran withdraws the lawsuit.

Otherwise Iran "will have to sort out its nuclear issues in the international arena on its own", the source in Russia's presidential administration told Moscow's Kommersant newspaper.

The case will soon be heard at the International Court of Arbitration court in Geneva.

The Russians insist it is impossible to fulfil the 2007 missile deal because it would violate UN Security Council sanctions imposed over Iran's refusal to curb its nuclear programme, which Tehran insists is solely peaceful in nature.

Iran maintains the relevant UN resolution in June 2010 did not ban the missile sale. The Iranians and some hardline Russian nationalists have accused Moscow of using it as a pretext to renege on the deal under US and "Zionist" pressure.

Although the warnings relayed by Kommersant did not come from named Russian officials, Iran has taken them seriously.

But Tehran is not withdrawing the lawsuit, which it portrays as a routine contractual matter and not a political dispute that could endanger Iran's "strong and deep relations" with Russia.

With Israel banging the drums of war, Tehran would much prefer the S-300 missiles to the $4bn.

Iran's ambassador to Moscow, Seyyed Mahmoud Reza Sajjadi, said last week Iran would withdraw its legal complaint if the hardware were delivered.

Since the Kommersant article followed his offer, it clearly failed to mollify Russia, where many commentators saw it as an unacceptable bargaining ploy, and insisted attempts to pressure Moscow financially would fail.

"We support them and take a constructive position in talks on the nuclear issue, and they repay us like this," a Russian government official told Kommersant. The lawsuit was "unseemly" and Iran was "ungrateful".

While Russia did not veto several UN Security Council resolutions against Iran's nuclear programme, it sought to dilute them first. And Moscow has been critical of sanctions imposed separately by the US and the European Union.

Russian media said Moscow had already repaid Iran's $167m down payment on the S-300 missiles when Tehran sued Rosoboronexport, Russia's state-run weapons exporter, in the Geneva court in April last year.

Iran's huge damages claim only became public last month when it was revealed in an annual report by Rosoboronexport.

Mr Sajjadi, Iran's ambassador in Moscow, insisted Iran only ever wanted $900m in compensation. The Geneva court, he argued implausibly, added a further $3bn "without the knowledge of the Iranians side and against its will".

Iran's drive to resuscitate the missile deal belies its boast two years ago that it would build its own version of Russia's vaunted S-300 missile.

Given Russia's good relations with Iran, it is often forgotten how much suspicion bedevils their relationship.

Both are staunch supporters of Bashar Al Assad's regime in Syria and share a desire to curtail US influence in the Middle East. But they are divided over issues such as the demarcation of the Caspian Sea's boundaries and are natural competitors in gas pipeline politics.

The missile dispute is the "latest expression of disquiet that's always very close to the surface in Iran about Russia," said Sir Richard Dalton, a British former ambassador to Tehran and an associate at the Chatham House think tank in London.

"Iran likes to think that Russia is not as much of an enemy as the rest of us. But then they find themselves perpetually disappointed in what Russia can actually do for them."

Meir Javedanfar, an Iran specialist at the Interdisciplinary Centre in Herzilya, Israel, said it was "very much in Russia's interests to see Iran weak". Moscow, for instance, is "negotiating with Iran over the boundaries of the Caspian Sea and a weaker Iran means Iran can demand less".

But like many analysts, Mr Javedanfar believes it would be "a major mistake" for Iran to pursue the lawsuit against Russia, a country it cannot afford to alienate.

Tehran seems keenly aware of that. Iranian media, which periodically fulminate about "Russian duplicity", have played down the missile row.

Russia could yet deliver the S-300 missiles if Mr Al Assad is toppled, which could "significantly increase the chances of a strike on Iran", Ruslan Pukhov, the head of a Russian defence think tank said last month.

Other Russian analysts speculate Moscow could send Iran the missiles if Russia loses the legal battle in Geneva. Western analysts disagree.

"The Russians know that if Iran is about to get a batch of S-300s, then it may actually push Israel to go ahead and launch pre-emptive strikes against Iran's nuclear facilities," said Scott Lucas, an Iran expert at Birmingham University in England.

Sir Richard said the Russians would not supply S-300s while the nuclear dispute persists. "If they did, their international credibility would look pretty thin," he said.

Iranian mistrust with Russia stretches back nearly two centuries when the two countries battled over control of Central Asia and the Caucasus.

As the radical young leader of a student faction more than 30 years ago, Mahmoud Ahmadinejad, now Iran's president, initially opposed the seizure of the US embassy, a 444-day debacle that scarred the American psyche.

He instead proposed storming the Soviet Embassy.