Nazanin Zaghari-Ratcliffe arrived back in the UK in the early hours of this morning — after six years detained in Iran. One of the biggest impediments to securing her release was Iran’s demand that Britain return what it said was an unpaid debt of £400 million.
So what is the debt for, does the UK actually owe Tehran the money and how did it help to secure Zaghari-Ratcliffe’s release?
How did the debt arise?
In the 1970s the British government entered into a contract with the Iranian government to sell more than 1,500 Chieftain battle tanks. At the time the country, ruled by Shah Mohammad Reza Pahlavi, was an ally of Britain and seen as a key regional partner.
Iran paid £600 million in advance for the tanks but in January 1979 the Iranian government collapsed and the shah fled into exile. He was replaced by Ayatollah Khomeini, the Islamic leader and first supreme leader of the country.
By the time of the Islamic Revolution only 185 tanks had been delivered. In February 1979 the government announced that it would not be handing over the remaining vehicles.
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What happened next?
In 1990, after years of failed private diplomatic negotiations, Iran took the UK to an international court of arbitration in the Hague and demanded the return of its money.
The UK fought the claim in a long-running dispute but in 2001 the court ruled in favour of the Iranians. Iran then sought to have the award enforced in the English courts, something the UK again resisted. Its final appeal was dismissed in 2009.
So why didn’t Britain pay?
By 2009 Iran was the subject of international sanctions that were designed to put pressure on the regime to halt the enrichment of uranium, which the UK and its western allies believed formed part of a nuclear weapons programme. The UK argued that it could not pay the money as this would be in breach of the international sanctions that had been put in place by the European Union.
What has the debt got to do with Nazanin Zaghari-Ratcliffe?
While Iran has never publicly linked its demands for Britain to pay the £400 million to the release of Zaghari-Ratcliffe, it made it clear behind the scenes that this was a precondition of her release.
Ministers have previously opposed this, insisting that the two issues cannot be linked. However, when Jeremy Hunt was foreign secretary, he moved to change the government’s decision, viewing it not as a ransom demand but an issue of a legally acknowledged debt.
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Ben Wallace, the defence secretary, has long been adamant that Britain should honour the debt, going so far as to say in 2014 that not settling the case was “un-British, double-dealing and obfuscatory”.
Why has a deal been done now?
Ministers agreed a deal to pay £393.8 million to Iran that they say can only be used only for humanitarian purposes — so it is not technically in breach of existing western sanctions. It is understood that the money will be held on Iran’s behalf in Oman, which helped to broker the deal, and can be drawn down for specific purposes.
Both sides are tight-lipped about the exact terms of the agreement, saying that it is confidential.
Was that the only reason Zaghari-Ratcliffe was released?
No. Britain, with other countries, has been negotiating a new deal with Iran to lift sanctions in return for a commitment over Tehran’s nuclear programme. The previous deal was abandoned by Donald Trump in 2018.
Those talks have increased in intensity in recent months, with reports that the US could be close to rejoining the agreement, despite complications caused by Russia’s invasion of Ukraine. The deal, known as the Joint Comprehensive Plan of Action (JCPOA), would ease sanctions on Iran in return for limits being put on Tehran’s nuclear programme and an international inspection regime.
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Both the US administration and the British government have repeatedly insisted that there is no connection between the efforts to negotiate the release of dual-national prisoners and the nuclear talks. However, after the JCPOA’s initial implementation in 2016, the US secured the release of four American prisoners from Iran.
