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Iran ordered 1,500 Chieftain tanks from the UK in the 1970s.
Although the parties deny the direct link between one event and the other -and affirm on the contrary that they were “parallel” efforts-, a few days ago the United Kingdom paid a historic multimillion-dollar debt that it had with Iran, and the Islamic republic released two prisoners British.
Nazanin Zaghari-Ratcliffe, jailed in 2016 for allegedly masterminding a plot to overthrow the Iranian government, and Anoosheh Ashoori, accused of espionage and jailed since 2017, both of British and Iranian nationality, were released on Wednesday and returned to Britain.
At the same time, London paid Tehran almost £400 million (regarding US$530 million) that it had been owed for 43 years for a truncated agreement for the sale of war material between the British Ministry of Defense and the then Shah of Iran, in which the former benefited from a large arms deal and the latter, from bribes he received for those purchases.
Iran paid but the war material never reached Tehran.
But to understand all this history you have to go back to the beginning of the 20th century, when Iran was not Iran, but Persia.
British interest in Persia
In 1901, an English millionaire named William Knox D’Arcy agreed to a 60-year oil exploration and exploitation concession with the Shah in exchange for £20,000 in cash (equivalent to regarding $3 million today), £20,000 in shares and 16% of eventual profits.
It took seven years for explorers hired by D’Arcy to find crude, but they finally did in southwestern Persia. With this finding, a year later the Anglo-Persian Oil Company was created.
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Anglo-Persian Oil Company oil well in 1909.
Shortly before World War I began, the Anglo-Persian Oil Company found an excellent customer: the United Kingdom.
With Winston Churchill as First Lord of the Admiralty -in charge of managing the Royal Navy and who needed to ensure oil supplies-, the British government invested £2 million (regarding US$270 million today), acquired a portion of the shares that gave it control of the company and became the hidden de facto power behind the oil company.
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George Bernard Reynolds (left) traveled to Persia under contract to D’Arcy to search for oil.
The business was round: cheap oil in a long-term concession.
The years passed – in the meantime the country was renamed Iran – and in 1941, in the midst of World War II, the United Kingdom began to worry. The shah of the time, Reza Pahlavi, flirted with Nazi Germany and the British feared that he would cede control of oilwhich was critical to the Allies.
That is why they joined the Soviet Union and carried out the Anglo-Soviet invasion of Iran. In less than a month they removed Reza Pahlavi from power and put in his son Mohamed, who had a position contrary to the Axis powers.
A decade later, in 1951, and faced with the British refusal to share equally the profits from the sale of hydrocarbons, the Iranian Parliament decreed the nationalization of the oil industry, for the most part under the power of what is now called Anglo- Iranian Oil Company. In response, the UK imposed a trade blockade and the shah fled the country.
But the commercial blockade was not enough for the British empire. For this reason, its intelligence service, MI6, allied itself with the American CIA and designed a new coup d’état that overthrew the prime minister, Mohamed Mossadeq, and returned the shah to power.
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Shah Mohamed Reza Pahlavi with Queen Elizabeth in London in May 1959.
The British Spy Liaison
By the 1970s, Shah Mohamed Reza Pahlavi had made the Persian country a vital strategic ally for Britain, a bloc once morest Soviet expansion and a huge market for British arms sales.
The Shah had promised that by 1975 Iran would be the most powerful nation in the Middle East, more powerful even than Israel. For this he came to allocate a third of the budget to keep the military happy.
And for most of the 1970s, a quarter of all UK arms sales went to Iran.
In two deals in 1971, the shah bought nearly 800 Chieftain tanks, Britain’s main battle tank, from Britain.
Three years later, another deal increased purchase to 1,500 Chieftain tanks and 250 armored vehicles worth an estimated £650m.
In all these deals, there were bribes.
But since it would have been unseemly for someone in the shah’s position to broker his own corruption, he sought out an intermediary who, incidentally, had been a British spy in Iran for years: Shapoor Reporter.
Reporter was a man of Indian-Iranian origin born in 1921 whose father had helped the Shah’s father seize power in Iran, and he himself had helped the shah to return to the throne in 1953.
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Shah Mohamed Reza Pahlavi and his then wife, Queen Soraya, in 1951.
Shapoor Reporter was called “Mr 1%”. Bribes were shared with the shah for brokering arms sales from the United Kingdom to Iran, all with the knowledge and endorsement of the British government, according to cables sent from the British embassy to London at the time.
It served the UK. So much so that in 1973, Shapoor Reporter was knighted.
“It was a huge arms deal. It would be worth billions today. It basically kept a whole factory in Leeds employing 10,000 people. The UK needed this tank deal because it basically closed the gap to the next generation of British Army tanks.” , which they expected the Leeds plant to manufacture,” Nicholas Gilby, author of the book Deception in High Places: A History of Bribery in Britain’s Arms Trade (in Spanish, “Deception from above: a history of bribery in the arms trade of Great Britain”).
Iran paid the money in advance to International Military Services (IMS), a private company then a subsidiary of the Defense Ministry.
For 1977, Reporter and the shah had received more than 7 million pounds in bribes from the United Kingdomapproximately US$66 million at current prices.
But only 185 of the tanks were handed over to the Iranian authorities before the monarchy fell in 1979 with the Iranian revolution and Britain refused to continue supplying the military equipment.
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Protesters in Iran burn an image of the shah in 1978.
Since then, the Iranian government has been trying to recover that money.
What measures did Iran take?
In 1990, Iran took IMS to the International Chamber of Commerce (ICC), a global trade organization that rules on trade disputes between countries.
In 2001, a hearing ruled in favor of Iran. IMS appealed, although in 2002 it agreed to pay £328.5 million (nearly $500 million at the time) to the court, should its appeal fail.
The appeal hearings concluded in 2009 and the decision was upheld in favor of Iran.
However, the European Union imposed sanctions on Iran in June 2008, and the IMS payment was not delivered to the Iranians.
The UK government admitted it owed Iran for the undelivered tanks, but said it might not make the payment while Iran was still subject to economic sanctions.
Added to this was the complexity of determining how much the UK owed Iran.
On Wednesday, UK Foreign Secretary Liz Truss told British MPs that “highly complex” negotiations had led the government to find a way to make a £393.8 million payment and that delivery complied with existing sanctions, global counterterrorism financing rules, and anti-money laundering regulations.
Truss said the terms would be kept confidential, but added that Iran might only use the funds for humanitarian purposes.
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