Russia will pay back Iran's downpayment on an order for a missile system after refusing to fulfil the contract, a top Russian official says.
The Kremlin last month banned the sale of the S-300 air defence system to Iran after it was outlawed by UN sanctions.
Sergei Chemezov, head of Russia's state weapons exporter, said it had annulled the contract and would repay Iran's $166m (£105m) advance payment.
But beyond that, he said, "we are not obliged to return another kopeck".
"Of course, they are not very pleased. We do not have a choice," he added.
Iranian officials have accused Moscow of breaching its contract and caving in to US pressure.
Possession of S-300 systems would have enhanced Iran's defence of its nuclear facilities against attack from the air.
There has long been speculation that Israel may attempt to bomb Iranian facilities to prevent Iran acquiring nuclear weapons.
Iran denies seeking nuclear weapons, insisting that its programme is purely civilian.
Russia has recently fallen in alongside the US and European powers in taking a hard line with Iran over its nuclear programme, supporting tougher sanctions at the UN.