The contract arouses serious concerns in the West and in Israel since they believe it may lead to destabilizing the region and apparently don’t want Tehran to have protection from aerial attacks. With Iran pushing ahead with its controversial nuclear program, many analysts have said it is possible Israel would launch a preemptive attack against the Islamic Republic.

According to an official military statement issued on October 22, Russia “does carry out military-technological cooperation with the Islamic Republic of Iran in strict compliance with existing legislation and its international liabilities, and will continue doing so in the future.”

The comment was made regarding the sales of S-300 missiles to Iran and was placed on the official website of the Federal Service for Military and Technological Cooperation.

“We cannot make any comments regarding any specific plans or liabilities under the existing contracts, because acting otherwise would be tantamount to proving one an unreliable partner and giving a chance for potential competitors to take advantage of the situation,” it reads.

It’s been rumored in the media that Russia could cancel its contract to deliver S-300 systems to Tehran signed back in December 2005.

RIA Novosti, quoted Russian military analyst Konstantin Makiyenko as saying that the decision not to go ahead with the agreement would cost Russia about $1 billion in lost profits and $300-400 million in fines and penalties.

However, Interfax agency, citing an unnamed source from executive structures, writes that Moscow’s possible refusal to fulfill the contract for S-300 deliveries to Iran wouldn’t have any serious financial consequences since no payments had been made yet.

“Even though the contract was signed several years ago, the Russian side hasn’t confirmed it came into affect so far. Thus, the Iranian side hasn’t made any prepayments,” the source said. He said that after being signed, military contracts have to be approved by the governments of both sides. Unless the sides inform one another that the contract has come into force, no payments are normally made.

Due to the circumstances, he said, the Russian contract with Iran has been frozen indefinitely. It is unlikely that Russia would unilaterally cancel the agreement. However, a lot would depend on political circumstances, “since this contract has stopped being a purely commercial deal.”

The S-300 is a long-range air-defense system capable of shooting down aircraft and missiles at a range of up to 150 kilometers. It’s meant to be used with a closer-range system like the Tor-M1 Russia sold earlier to Iran in a separate deal.

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