Russian officials say the country plans to reimburse Iran, after Moscow canceled the sale of an air defense missile system to Tehran. The announcement comes as the Russian president is on a one-day state visit to Cyprus.
In the scope of an $800 million contract brokered in 2005, Russia was obliged to send Iran at least five S-300 missile systems.
But last month, Russian President Dmitry Medvedev banned the sale of the missile systems following United Nations sanctions against such arms sales.
The U.N. imposed the sanctions in June for Iran's refusal to stop enriching uranium.
Mr. Medvedev also outlawed the sale of tanks, aircraft and sea vessels to Iran.
The proposed deal caused alarm in the United States and Israel as the S-300 can track 100 targets at once and fire on aircraft up to 75 miles away.
Possession of S-300 systems would have also boosted Iran's defense of its nuclear facilities against attack from the air.