Russia plans to pay Iran about $800 million to compensate for its failure to deliver S-300 missile systems, the head of state-controlled conglomerate Russian Technologies, Sergei Chemezov, said on Thursday.
Russian President Dmitry Medvedev banned the delivery of the high-precision air defence missiles to Iran last month, saying that sending them would violate sanctions adopted by the U.N. Security Council against Tehran in June.
Iran had criticised Russia for abandoning the deal, which the United States and Israel had urged Moscow to drop because of fears Tehran could use the missiles to protect nuclear facilities they suspect are part of a weapons programme.
Russian officials had made conflicting statements about whether Russia would have to compensate Iran for failure to fulfil a contract Tehran first revealed publicly in 2007.
Chemezov suggested compensation was required under the contract, but analysts said the announcement appeared aimed at appeasing Iran after pleasing Washington and Israel by scrapping the missile deal.
"We annulled the contract, now we are conducting talks about how to compensate the losses they have incurred," Chemezov, accompanying Medvedev on a visit to Cyprus, told reporters.
Yevgeny Volk, director of the Moscow office of the Heritage Foundation think-tank, said Russia was eager to balance out recent steps it has taken against Iran and avoid losing a hard-currency paying client of its arms industry.
"Russia does not want to close the door on profitable and beneficial cooperation with Iran," Volk said.
U.N. SANCTIONS
Chemezov said that Russian Technologies expected to receive the money from the state and would then make the payment to Iran. He said it was unlikely to happen until next year.
In recent years, Russia had appeared to use the missile contract as a lever in diplomacy with Iran and the Western nations pressing to punish Tehran over its nuclear programme.
Moscow's support for a fourth round of U.N. sanctions was part of a gradual shift closer to the tougher stance the United States and European Union have taken towards Iran.
Russia, which has built Iran's first atomic power plant, supports Western efforts to make Iran prove its nuclear programme is purely peaceful, but strongly opposes the use of force against it.
Iran is Russia's biggest trading partner in the Middle East. Bilateral trade totalled $3 billion in 2009, of which Russian exports to Iran — mainly ferrous metals, cars and arms — accounted for 93 percent.
