Russia may lose billions for breaching missile contract with Iran

MOSCOW, June 30 (RIA Novosti)
Russia's [sudden turnaround - RP] refusal to deliver S-300 surface-to-air missile systems to Iran means Tehran could turn to China as its main arms supplier, depriving Moscow of a serious source of revenue, a Russian daily suggested on Wednesday.
Moscow said in mid-June it would freeze the delivery of S-300 air-defense systems following a new round of UN sanctions imposed on Tehran on June 9. Security Council Resolution 1929 imposed a fourth set of sanctions on Iran over its nuclear program, including tougher financial controls and an expanded arms embargo.
According to Nezavisimaya Gazeta, Russia's losses will amount to the value of the contract plus penalties for breach of contract.
The S-300 contract is worth some $800 million, while Russian experts estimate the penalty for breach of contract at $400 million.
Furthermore, Iran could refuse to buy any more military products from Russia, leading to an estimated loss of $300 million to $500 million a year.
In another indication of a trend that should be worrying to Moscow, experts pointed to Iran's decision to effectively end cooperation with Russia in the civil aviation sector.
Earlier in June, Iran banned its airlines from using Russian-built Tu-154 airliners on domestic and international routes. In addition, there have been reports of the imminent deportation of Russian pilots because the Islamic Republic already has "enough qualified flight personnel."
Iranian Defense Minister Ahmad Vahidi warned on June 22 that Russia would be responsible for the consequences of its failure to deliver S-300 surface-to-air missile systems to Iran.
Russia initially said the delivery of S-300 systems to Iran would not be affected by the new UN sanctions since they are not included in the UN Register of Conventional Arms, but experts from the Federal Service for Military and Technical Cooperation concluded the missiles did come under the new set of sanctions.
A Kremlin source echoed that opinion on June 11, while Foreign Minister Sergei Lavrov said it was up to the president to make the final decision.
Moscow signed a contract on supplying Iran with at least five S-300 systems in December 2005, but nothing has been delivered. The United States and Israel have urged Russia not to fulfill the contract.
The advanced version of the S-300 missile system, called S-300PMU1, has a range of over 150 kilometers (over 100 miles) and can intercept ballistic missiles and aircraft at low and high altitudes, making it effective in warding off airstrikes.
MOSCOW, June 30 (RIA Novosti)