UK, Iran discussed £400m debt repayment in Tehran: ambassador

British government officials travelled to Tehran last week to discuss legal channels for clearing a historical £400m debt owed to Iran, the Islamic republic's ambassador to the UK said on Friday.

The debt relates to money paid more than four decades ago for tanks that were never delivered. The money is thought to be a key sticking point for Iran in discussions relating to the release of British citizens it has jailed.

"We are trying. We should not be that pessimistic. We are working with our Foreign Office colleagues maybe to reach that deal. We are in the process of discussions. Last week there was a delegation from the UK in Iran and personally I was talking to the Foreign Office and I am hopeful we will reach an agreement," Iranian ambassador Mohsen Baharvand was quoted by The Guardian as saying.

Baharvand added that London and Tehran had come close to settling the debt during the summer, however could not complete the negotiations due to US sanctions.

"We wanted to use that deal to ask our people that we are seeing a good sign from the UK and then that gives us a possibility to expedite our efforts to help the dual nationals and things like that. Then we had a deal. We signed it but two days after the signature of that deal the UK government said they could not implement it because of US sanctions," he said.

The ambassador also addressed reports that the UK could circumvent sanctions by repaying the debt in kind, including through aid.

"It’s not aid. Our money is here and we want our money. That is very simple. We want to receive our money. We are not insisting on interest. Otherwise it would be billions. We are talking to our UK colleagues as to which channel is the most probable to transfer that money to our accounts," Baharvand said.

Relatives of British citizens jailed in Iran say that their loved ones have been kept behind bars over the debt - something which former foreign secretary Jeremy Hunt has also indicated.

Iran has insisted that the issue of Britons jailed in Iran is separate from other discussions, including the Vienna nuclear talks.

British-Iranian nationals Nazanin Zaghari-Ratcliffe and Anoosheh Ashoori are currently held in Iran on charges of espionage. Their families have campaigned tirelessly to press the UK government to get them released and strongly deny the charges.