The contract to supply Iran with the missile system, one of most effective in existence, was signed at the end of 2007. Russia was to supply five divisions' worth of S-300PMU-1 for $800 million. Russia canceled the contract to supply Tehran with S-300 air defense missile systems because of UN sanctions against the Islamic Republic.

"We have received $166.8 million prepayment under the contract and according to a paragraph on force-majeure circumstances, we are obliged to return this amount," Chemezov said. "We are not obliged to return a [cent] more," he added.

Russian President Dmitry Medvedev signed an order on 22 September on compliance measures with UN sanctions against the Islamic Republic over its nuclear program, which the West believes is aimed at developing nuclear weapons. Iran denies the allegations.

Medvedev's order banned export to Iran of armored vehicles, military aircraft, helicopters and ships.

The missile systems originally destined for Iran have been built, and could possibly be supplied to a third country, Chemezov said, with money from any sale being used to compensate Tehran.

The S-300 system is designed for defending high-value objects such as military bases and command and control centers. It can engage all kinds of aerial targets including ballistic and cruise missiles, up to a range of 150 kilometers and an altitude of 27,000 meters.