ITALY WON'T FORCE IRAN WTO ACCESSION ISSUE

C O N F I D E N T I A L SECTION 01 OF 02 ROME 001962 SIPDIS NP/RA, EUR/PRA, EUR/RUS, EUR/WE E.O. 12958: DECL: 04/19/2012 TAGS: PREL ETRD EU ETRD EU IT WTO ITPREL WTO SUBJECT: ITALY WON'T FORCE IRAN WTO ACCESSION ISSUE CONFIDENTIAL PAGE 02 ROME 01962 01 OF 02 191836Z REF: (A) STATE 71421 (B) ROME 1355 CLASSIFIED BY: CLASSIFIED BY ECOUNS KAREN MILLIKEN; REASON 1.5 B/D. ¶1. (C) SUMMARY AND COMMENT. ITALY STRONGLY DISAGREES WITH USG POLICY ON IRAN'S POTENTIAL ACCESSION TO THE WORLD TRADE ORGANIZATION BUT DOES NOT INTEND TO PUSH THE EU TO FORCE THE ISSUE AT THE MAY 13 WTO GENERAL COUNCIL MEETING OR THEREAFTER, ACCORDING TO MFA'S WTO COORDINATOR. ALTHOUGH THE ITALIANS WILL NOT MAKE AN ISSUE OF IRAN'S WTO AMBITIONS, NEITHER CAN WE EXPECT THEM TO CARRY REF A'S SUGGESTED MESSAGE TYING CLOSER ECONOMIC TIES TO IMPROVED PERFORMANCE ON THE LISTED ISSUES. ON THE CONTRARY, WE CAN COUNT ON THEM TO COMMISERATE WITH THE IRANIANS ABOUT PERCEIVED USG OBSTINACY ON WTO AS BENEFITING CONSERVATIVES AT THE EXPENSE OF REFORMERS. END SUMMARY AND COMMENT ¶2. (C) ITALY ACCEPTS REF A'S STRAIGHTFORWARD MESSAGE THAT WE ARE NOT OPEN TO DISCUSSION OF IRANIAN ACCESSION TO THE WTO AND, CONSEQUENTLY, ITALY SEES THE MATTER AS A NON-ISSUE FOR THE MAY 13 WTO GENERAL COUNCIL MEETING, MAURIZIO ZANINI, MFA'S WTO COORDINATOR, TOLD ECONOFF ON APRIL 17. ECONOFF ASKED WHETHER ITALY, LONG A FACILITATOR OF IRAN'S CONTACTS WITH THE WEST, WOULD PRESS THE EU TO SPONSOR IRAN IN GENEVA. ZANINI REPLIED THAT ITALY PICKS VERY CAREFULLY THE ISSUES ON WHICH IT LOOKS TO LEAD THE EU AND, IN THE TRADE AREA, ITALY'S SINGLE PROACTIVE ISSUE IS INTELLECTUAL PROPERTY PROTECTION FOR GEOGRAPHICALLY DESIGNATED PRODUCTS. HE SAID ITALY WILL NOT SPEND ITS WTO CAPITAL IN THE EU ON IRANIAN ACCESSION. ¶3. (C) ALTHOUGH CONCEDING THE ESSENTIAL POINT OF OUR CONFIDENTIAL PAGE 03 ROME 01962 01 OF 02 191836Z DEMARCHE, ZANINI LAMBASTED THE USG POSITION. HE WANTED TO BE SURE THE USG UNDERSTANDS THAT SUCCESS IN BLOCKING CONSENSUS ON AN ACCESSION PROCESS FOR IRAN IS NOT TANTAMOUNT TO ITALY OR THE EU ADOPTING WHAT HE SEES AS MISGUIDED U.S. POLICY. HE SAID ITALY, ON THE CONTRARY, "SUPPORTS EVERYONE FOR WTO ACCESSION. THE WTO'S MOST COMPELLING ASPECT IS ITS INCLUSIVENESS. WHEN THE ISRAELIS SPEAK, FOR EXAMPLE, THE ARABS DON'T WALK OUT." THE U.S., HE INSISTED, IS ASKING THE WRONG QUESTION. FOR ZANINI, THE QUESTION ISN'T WHETHER IRAN'S POLITICAL CONDUCT WARRANTS WTO MEMBERSHIP BUT WHETHER THE WORLD IS BETTER OFF WITH IRAN, NOTWITHSTANDING ITS POLITICS, SUBJECT TO INTERNATIONAL TRADE RULES. HE BELIEVES IRAN'S EVENTUAL WTO MEMBERSHIP WOULD HELP STABILIZE THE WORLD TRADING SYSTEM AND, ESPECIALLY GIVEN MAJOR ITALIAN INVESTMENTS IN IRAN, HE WOULD LOOK NO FURTHER FOR JUSTIFICATION FOR LAUNCHING AN ACCESSION PROCESS. IF THE USG WANTS TO LOOK FURTHER, HE SUGGESTED, WE MIGHT CONSIDER WHETHER ENHANCED STABILITY IN THE TRADING SYSTEM MIGHT NOT FOSTER ENHANCED POLITICAL STABILITY AS WELL. ¶4. (C) ECHOING COMMENTS MADE BY MFA ACTING GULF STATES OFFICE DIRECTOR EMANUELE FARRUGGIA TO POLOFF AND ECONOFF, ALSO ON APRIL 17, ZANINI SAID THE DISCUSSION OF WTO ACCESSION FOR IRAN IS, IN ANY EVENT, LARGELY SYMBOLIC. MFA SEES THE IRANIAN ECONOMY AS YEARS AWAY FROM A SERIOUS WTO RUN AND FALLING EVEN FURTHER BEHIND AS WITNESSED BY IRAN'S RECENT FAILURE TO ENACT EVEN RUDIMENTARY FOREIGN INVESTMENT INCENTIVES (SEE ALSO REF B). NOTING THAT OUR DEMARCHE MAKES NO MENTION OF THE OBVIOUS ECONOMIC BASIS FOR DENYING IRAN WTO ACCESSION, FARRUGGIA SAID ITALY IS PRESSING IRAN HARD FOR CONFIDENTIAL PAGE 04 ROME 01962 01 OF 02 191836Z BOTH ECONOMIC AND POLITICAL REFORM BUT DOES NOT SEE ONE EFFORT AS LEVERAGING THE OTHER. ¶5. (C) IN RESPONSE, EMBOFFS PRESENTED REF A POINTS, EMPHASIZING THAT A LINKAGE BETWEEN CESSATION OF IRAN'S OBJECTIONABLE BEHAVIOR AND ECONOMIC COOPERATION COULD GIVE IRANIAN REFORMERS BOTH A MEANS AND A MOTIVE TO AFFECT THE BEHAVIOR OF CONSERVATIVES. ECONOMIC COOPERATION UNLINKED TO POLITICAL BEHAVIOR, WE CONTINUED, COULD LEAVE CONSERVATIVES CONVINCED THAT IRAN'S POLITICAL CONDUCT WAS OF NO CONCERN TO WESTERN ECONOMIES. FARRUGGIA ARGUED THE OPPOSITE POINT -- THAT WITHHOLDING ECONOMIC COOPERATION WOULD BOLSTER THE CONSERVATIVES' CONTENTION THAT IRANIAN RAPPROCHEMENT WITH THE WEST IS ONE-SIDED. ¶6. (C) FARRUGGIA COMMENTED ON TWO OF REF A'S POINTS IN PARTICULAR -- IRAN'S EVIDENT NUCLEAR AMBITIONS AND ITS SUPPORT FOR VIOLENT OPPOSITION TO THE MEPP. HE SAID IRAN HAS SEEN A NUCLEAR WEAPON CAPACITY AS AN ESSENTIAL NATIONAL INTEREST EVER SINCE THE SHAH'S REGIME. HE FEELS THAT ANY EFFORT, THROUGH THE NONPROLIFERATION TREATY OR OTHERWISE, TO DISSUADE IRAN FROM PURSUIT OF NUCLEAR WEAPONS MUST TAKE INTO ACCOUNT THE VISCERAL PLACE THESE WEAPONS OCCUPY IN THE IRANIAN NATIONAL PSYCHE. ON THE OTHER HAND, HIS FREQUENT CONTACTS WITH IRANIAN OFFICIALS HAS NOT LEFT HIM WITH A SENSE THAT SUPPORT FOR PALESTINIAN NATIONALISM IS SIMILARLY CENTRAL TO THEM. CONFIDENTIAL CONFIDENTIAL PTQ2716 PAGE 01 ROME 01962 02 OF 02 191836Z ACTION NP-00 INFO LOG-00 AID-00 AIT-03 AMAD-00 ACQ-00 CEA-01 CIAE-00 COME-00 CTME-00 INL-00 DODE-00 SRPP-00 DS-00 EB-00 EUR-00 EXIM-01 E-00 VC-00 FRB-00 H-01 TEDE-00 INR-00 IO-00 ITC-01 LAB-01 L-00 VCE-00 MOFM-05 MOF-01 AC-01 NEA-00 DCP-01 NSAE-00 NSCE-00 OES-01 OIC-02 OMB-01 OPIC-01 PA-00 PM-00 PRS-00 ACE-00 P-00 SCT-00 SP-00 SSO-00 SS-00 STR-00 TRSE-00 T-00 USIE-00 SA-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00 NFAT-00 SAS-00 /023W -------------- 88ED59 191836Z /38 P 191732Z APR 02 FM AMEMBASSY ROME TO SECSTATE WASHDC PRIORITY 3357 INFO IRAN COLLECTIVE AMCONSUL FLORENCE AMCONSUL MILAN AMCONSUL NAPLES USMISSION GENEVA C O N F I D E N T I A L SECTION 02 OF 02 ROME 001962 SIPDIS NP/RA, EUR/PRA, EUR/RUS, EUR/WE E.O. 12958: DECL: 04/19/2012 TAGS: PREL ETRD EU ETRD EU IT WTO ITPREL WTO SUBJECT: ITALY WON'T FORCE IRAN WTO ACCESSION ISSUE CONFIDENTIAL PAGE 02 ROME 01962 02 OF 02 191836Z ¶7. (C) COMMENT. ITALY GENERALLY SAVORS ITS OCCASIONAL ROLE AS WASHINGTON-TEHRAN MESSAGE CARRIER, MOST RECENTLY EVIDENT WHEN ITALY CONVEYED IRAN'S CONCERN ABOUT ITS PROFILE IN DOD'S NUCLEAR POSTURE REVIEW. THE ITALIANS, HOWEVER, DRAW THE LINE AT ADOPTING AS THEIR OWN THE USG-SUGGESTED LINKAGE BETWEEN POLITICAL REFORM AND ECONOMIC COOPERATION. THE ITALIAN ENERGY GIANT ENI, BY ITSELF, HAS TEN BILLION DOLLARS AT RISK IN IRAN AND THE GOVERNMENT OF ITALY, ENI'S BIGGEST SHAREHOLDER, ISN'T ABOUT TO MAKE IT MORE AT RISK. MFA WILL CONTINUE TO PUSH IRAN ON WMD, BALLISTIC MISSILES, SUPPORT FOR TERRORISM, AND THE REST, BUT ECONOMIC RELATIONS WILL CONTINUE ALONG A DIFFERENT PATH. IN PARTICULAR, ITALY HAS LONG SUPPORTED IRAN FOR WTO ACCESSION AND WILL CONTINUE TO DO SO, ALBEIT NOT TO THE POINT OF PROVOKING AN EU CONFRONTATION WITH THE U.S. WE SHOULD EXPECT, MOREOVER, THAT THE ITALIANS WILL COMMISERATE FULLY WITH INEVITABLE IRANIAN COMPLAINTS THAT USG OBSTINACY ON WTO ACCESSION PLAYS INTO THE HANDS OF THOSE IN IRAN WHO OPPOSE REFORM. SEMBLER CONFIDENTIAL > 2002ROME01962 - Classification: CONFIDENTIAL