Britain denies $500 million debt to Iran linked to bid to free jailed aid worker

LONDON (Reuters) - Britain said on Thursday that moves toward paying half a billion dollars to Iran for a debt owed since the 1979 Islamic Revolution had nothing to do with a bid to secure the release of a jailed Iranian-British aid worker.

Nazanin Zaghari-Ratcliffe, a project manager with the Thomson Reuters Foundation, was detained in April and sentenced to five years after an Iranian court convicted her of plotting to overthrow the clerical establishment. She denies the charges.

Prime Minister Theresa May’s government is under intense pressure to secure Zaghari-Ratcliffe’s release, in part because Foreign Secretary Boris Johnson made remarks that Iran said justified her conviction.

Britain has sought legal advice over whether it could transfer over 400 million pounds ($528 million) which it owes the Islamic Republic in capital and interest for a 1970s arms deal with the then-Shah of Iran, the Telegraph newspaper.

Britain owes the money after the Shah paid up front for 1,750 Chieftain tanks and other vehicles, almost none of which were eventually delivered after the Islamic Revolution of 1979 toppled the U.S.-backed leader.

British officials did not directly answer requests for comment on whether they were preparing to pay the money to Iran, but May’s spokesman said the debt issue was not linked to the attempts to convince Tehran to release Zaghari-Ratcliffe.

Talks to resolve the debt matter have been going on for years.

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“It is wrong to link a completely separate debt issue with any other aspect of our bilateral relationship with Iran,” a government spokesman said, adding that Iran’s Defence Ministry remains subject to European Union sanctions.

The debt was paid to a bank account controlled by the High Court in 2002 but has not been released due to sanctions on the Islamic Republic, the spokesman said.

Iran rejected media reports associating the debt Britain owed to Iran with the fate of Zaghari-Ratcliffe.

“These are two separate matters ... Linking them is wrong. Nazanin Zaghari-Ratcliffe has been tried and sentenced to jail,” TV quoted Foreign Ministry spokesman Bahram Qasemi as saying.

British officials told the Telegraph that work on how to pay the debt has intensified in recent months in a bid to improve relations with Iran.

When asked about the reports, May’s spokesman said the government saw no connection between the debt and the fate of Zaghari-Ratcliffe. “We are clear we don’t see any link between these two issues,” the spokesman said. “The reports are speculation, not anything that I recognize.”

The Thomson Reuters Foundation is a charity organization that is independent of Thomson Reuters. It operates independently of Reuters News.

Editing by Mark Heinrich