Peru has been backed into a corner after finding it can neither afford the cost of five tanks purchased from China nor that of returning them due to the radical reduction of its military expenditure, the Peruvian newspaper La Republica reported Friday.

The five MBT-2000 tanks were transported to Peru in November as "temporary imports" and are now in military storage. The Peruvian army should either pay the total fee of $27.5 million, including an $8.5 million tariff, or transport them back to China at a cost of $10 million.

The supplier, China North Industries Corporation, last year adjusted the price from $5.8 million per unit to $4.7 million, but the Peruvian army still cannot afford this price tag after the government slashed 162 million soles ($59 million) from the country's yearly military expense.

The corporation has now agreed to the return, but it remains unclear which side will bear the cost.

Rafael Rey, Peru's Minister of Defense, announced in April that the council would indefinitely suspend the purchase order, saying that instead of buying expensive tanks, the country required helicopters and transport aircraft to support combat operations against insurgents and needed assistance for disaster relief.

Peru's President Alan Garcia confirmed the purchase of the tanks two years ago, after five demonstrators of MBT-2000 tank were shown in the Armed Forces Military Parade in Lima on December 8, 2009.

He explained that those tanks "are advanced technology," and that the purchase is due to the fact that many of Peru's T-55 tanks were in need of replacement.