Nazanin Zaghari-Ratcliffe release: Why does the UK Government owe Iran £400million?

Nazanin Zaghari-Ratcliffe has been freed and is “on her way home” to Britain along with British–Iranian businessman Anoosheh Ashoori, their lawyer Hojjat Kermani said.

The mother-of-one, from Hampstead, was arrested on charges of plotting against the regime while visiting her family in Tehran in 2016.

She was sentenced to five years in prison and then received another year’s confinement last April after being accused of “spreading propaganda”.

Iranian authorities told her she will be released, along with Anoosheh Ashoori and Morad Tahbaz, and Iranian-American businessman who also holds British citizenship, when the UK pays a £400million debt to Tehran.

Why does the UK owe Iran £400 million?

The £400 million debt relates to a dispute over the sale of defence equipment in the 1970s.

Before the Iranian revolution in 1979, the UK and Iran were considered allies.

Britain offered support to the country in exchange for concessions in sectors, such as oil, and the government was able to purchase arms from the UK.

In the 1970s when Shah Farah Diba faced the rise of Arab nationalists, he ordered some 1,500 Chieftain battle tanks and 250 repair vehicles from Britain at a cost of around £600million.

The UK’s state-owned International Military Services delivered 185 tanks before the 1979 uprising and the creation of the modern Islamic Republic of Iran.

The seizing of the United States embassy and the hostage crisis led to decades of tension between the West and the UK and the tank deal was revoked.

When the new Iranian leader, Ayatollah Khomeini, asked for a £400million refund to make up for the missing weapons, Britain refused.

What have the courts said?

Iran has now been pursuing the debt for more than four decades. In 2009 a international court in the Netherlands ordered Britain should repay the money.

International Military Services Ltd and the Treasury agreed to deposit the balance with the high court. But the money never made its way to Tehran, and is sitting in an independent trust in the UK.

The case has now morphed into a dispute over interest. Last year Iran lost its latest battle when three judges ruled in favour of the UK over £20million in interest payments.

Why has it not been paid?

In June 2008 the EU put Iran’s defence ministry under sanctions, which meant payments could not legally be made. Iran applied to a Treasury body for the money to go to the central bank of Iran, as the bank was not a sanctioned entity.

But the application never received a formal response and appeals for a UK judge to hand over the money have been deferred by Iranian lawyers.

Initially the UK government cited the payment would be in breach of UN sanctions and that any bank that helped transfer the cash would be vulnerable to US Treasury secondary sanctions or fines.

Some ministers are also believed to be opposed to giving the sum to a regime like Iran’s or appearing to pay a ransom to secure the release of prisoners.

Former foreign secretary Jeremy Hunt has said that practicalities are holding back the payment, but it should not be seen as the equivalent of a ransom payment but the settlement of an outstanding debt.

“We are a country that pays its debts,” he said.

What has this got to do with Nazanin Zaghari-Ratcliffe and other dual nationals imprisoned in Iran?

Mrs Zaghari-Ratcliffe’s family have said she was repeatedly told that her arrest was linked with the debt that the UK owes Iran.

Foreign Minister Mohammad Javad Zarif also cited the debt in an interview at the United Nations General Assembly in New York in 2019 .

The United States, France, Germany and Canada have had more success in securing release of prisoners jailed on false security charges.

British-Australian national Jolie King and her boyfriend Mark Firkin were arrested in 2019. Iranian authorities accused the couple of spying by flying a drone, which they were using to take selfies.

Ms King, who had been sharing a jail cell with Ms Zaghari-Ratcliffe, was released after three month and all charges dropped.

According to Australian minister, its government held “very sensitive” negotiations with Iran, which ensured their return to Australia.