TREASURY U/S LEVEY VISIT - ASKING UAE TO PROTECT

S E C R E T SECTION 01 OF 03 ABU DHABI 004473

SIPDIS

NOFORN
SIPDIS

TREASURY FOR U/S LEVEY, A/S POBRIEN, DAS DGLASER, RLOEFFLER
STATE FOR NEA/IR, NEA/ARP RTAGGART, DBAGWELL
STATE FOR S/CT, EB/ESC/TFS, INL/C/CP

E.O. 12958: DECL: 12/10/2016
TAGS: PREL KTFN ECON PTER IR AE
SUBJECT: TREASURY U/S LEVEY VISIT - ASKING UAE TO PROTECT
FINANCIAL SYSTEM FROM RISKS OF DOING BUSINESS WITH IRAN

REF: ABU DHABI 3799

Classified By: CDA Martin Quinn, for reasons 1.4 b and d.


1. (S) Summary. On December 6, 2006 Under Secretary of
Treasury for Terrorism and Financial Intelligence Stuart
Levey and a USG delegation met with UAE officials to
encourage support in isolating Iran from financial markets in
the UAE and internationally. Levey met with Sheikh Ahmed bin
Zayed Al Nahyan, Abu Dhabi ruling family member and Managing
Director of the Abu Dhabi Investment Authority (ADIA),who
expressed willingness to inform those who manage ADIA
investments that Abu Dhabi will be hesitant to invest its
assets with institutions that continue to do business with
Iran. In a separate meeting, UAE Central Bank Governor
Sultan bin Nasser Al Suweidi indicated a willingness to
cooperate with the U.S. regarding Iran Revolutionary Guard
Corps (IRGC) front companies doing business in UAE. He noted
that the UAE had closed 18 Iranian front companies at USG
request. Levey provided the name of an IRGC controlled
company and undertook to provide the names of additional
Iranian entities in the future. The Governor voiced concern
that in the future the USG might negotiate with Iran and
leave the UAE in a precarious position with its neighbor.
When asked if the E.O. 13382 list was disseminated to UAE
banks the governor replied that the Central Bank advises
banks &indirectly8 about the risks of Iranian institutions
) to avoid antagonizing the Iranians. In a meeting with
Minister of State for Finance Dr. Mohammed Khalfan bin
Kharbash, Levey encouraged the UAE, as a significant
institutional investor, to encourage leading money managers
to steer clear of Iran. U/S Levey was accompanied by
Ambassador; Henry Wooster (State, Deputy Director NEA/IR);
Econchief; OFAC Attach Abu Dhabi; Kristen Hecht, Treasury
Policy Advisor; and Matt Epstein, Treasury Financial Analyst.
End summary.

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Sheikh Ahmed ) ADIA
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2. (S) On December 6, 2006 U/S Levey met with Sheikh Ahmed,
Managing Director of ADIA and Under Secretary for the UAE
Finance Ministry, to explain the USG's efforts to financially
isolate Iran. He explained that the USG has already had some
success with financial institutions in Europe. Sheikh Ahmed
replied that ADIA did not have any investments in Iran,
Syria, or Lebanon, none of which it viewed as particularly
viable for investment. In fact, he noted that ADIA's
investments in the Middle East were very small. Levey
explained that the USG was looking for ADIA to reach out to
the money managers for its investments around the world in
order to convey the message that Abu Dhabi will be hesitant
to invest its assets with institutions that continue to do
business with Iran on account of Iran,s deceptive financial
conduct. He explained that some European financial
institutions had decided to stop doing business with Iran in
dollars, but would continue with business in other
currencies. The message the USG would like these
institutions to receive from a large investor like ADIA (and
the counterpart Dubai Emirate institutional investors),was
that business with Iran should stop in all currencies.


3. (S) Sheikh Ahmed said that it would be "no problem" for
ADIA to pass that message to institutions it invests with,
not officially, but &one way or another8. Sheikh Ahmed
stressed that "this was what partners do" adding that the UAE
also had concerns about Iran and its ambitions. He added
that while the UAE will be helpful they also expected that
the partnership between the USG and the UAE be &open and
clear.8 (Note: ADIA is -- according to Euromoney -- the
world's second largest institutional investor after the Bank
of Japan. Estimates of its portfolio are in the $500-$600
billion range and up. Post understands that ADIA's portfolio
is broken down into 45% equities, slightly over 20% in bonds,
and the rest in hedge funds, real estate, private equity, and
other portfolio investment vehicles. ADIA does not engage in
foreign direct investment, and in almost all cases keeps its
investments under reporting thresholds. End note.)

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Central Bank Governor Suweidi
--------------


4. (S) During his discussion with Governor Suweidi, Levey

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followed up on the meeting with Treasury Secretary Paulson
and Suweidi in September in Singapore on Iran. Levey
stressed that Iran is the issue of highest concern for the
USG and that while we are grappling with diplomatic options
through the UN, the USG is also pursuing cooperation with
allies to deny Iran access to the international financial
community ) particularly in light of its illicit banking
practices, support for terrorism, resurgence of the Iran
Revolutionary Guard Corps (IRGC) controlled companies and
Iran,s WMD proliferation. Levey inquired about the UAE
Central Bank study of the Iranian financial sector that was
mentioned after the September Joint Terrorism Financing
Coordinating Committee (JTFCC) with Treasury A/S Patrick
O,Brien (Ref A).


5. (S) Governor Suweidi said his most important concern was
whether the USG would be negotiating with Iran, as suggested
in current media reporting. Suweidi stated that "Your
friends (UAE) need to know what the future holds" for
U.S./Iran relations. He voiced concern that if the UAE
followed the U.S. lead and took actions against Iran it would
lead to problems with its neighbor. Should U.S. relations
with Iran improve, he noted, the UAE would then be left in a
precarious position. &Whatever we do at this stage will
have a lasting impact.8 Levey reiterated that the USG
concern and desire to take firm action on Iran has been
consistent from all USG officials.


6. (S) Regarding the review of Iranian financial
institutions in the UAE, the governor did not report
specifics but noted that the Central Bank thought the Iranian
banks were &careful with their transactions8. He also
noted that it was difficult to act against front companies
without the necessary information and that when the Central
Bank acted it would be discreetly. For example Governor
Suweidi noted that the UAE had already closed 18 companies of
concern to the U.S. by not renewing business licenses. The
Governor expressed a willingness to act against other
companies, though he said the UAEG would need specifics from
the USG: &We do not have an army to research these things.8
The Governor also inquired about the USG,s possible next
steps and what steps the UAE could take.


7. (S) Levey noted that the next USG moves would probably
involve increased pressure on Iranian state owned banks. In
terms of the next steps that the UAE could take, Levey
offered that the UAE should take a very intense look at
entities listed on the E.O. 13382 WMD proliferators list, as
well as companies associated with the IRGC. U/S Levey told
the governor about Khatam Al-Anbiya, an IRGC-owned company
that does a lot of Iranian government contracting. U/S Levey
promised to provide additional information on other
IRGC-controlled companies and individuals of concern. Levey
also passed a paper detailing actions taken by prominent
financial institutions, such as UBS and Credit Suisse, that
have cut off business with Iran. Levey conveyed concern that
as European banks cease or scale back from Iranian business,
the UAE might see an influx of Iranian financial and
commercial activity. Levey also warned Suweidi that anywhere
Bank Saderat operates regulators should be wary. (Note.
Bank Saderat has six major branches in the UAE, including its
regional headquarters for the Gulf. End note.)


8. (C) When Levey asked if the Governor disseminated the
lists of WMD Proliferators the USG provides, the Governor
said that because it was such a public action against Iran
"we can,t do it" but added that the UAE Central Bank,s
examiners do look at the names when they review the banks.
Governor Suweidi explained that the UAE actions against
Iranian institutions needed to be discreet. He noted that
they advise the banks &indirectly8 about the risks of
Iranian institutions -) so as not to antagonize the
Iranians. The best way to proceed is to give the Central
Bank the list and they will process them. Levey passed a
paper on Bank Sepah detailing USG concerns on their
activities )- particularly with respect to Iran,s Aerospace
Industries Organization (AIO) which has been designated under
E.O. 13382. Suweidi noted that Bank Sepah had no operations
in the UAE. (Note: Bank Sepah has correspondent banking
relationships with Iran-based UAE branches of Bank Melli and
Bank Saderat. End note.)


9. (S) Governor Suweidi closed the meeting by reaffirming
that the key concerns on Iran were their WMD proliferation
and their support for terrorism. Levey suggested adding

ABU DHABI 00004473 003 OF 003


"missile program" to the WMD issue. Levey encouraged the UAE
in its efforts to keep their financial sector free from
tainted activity -) through quiet initiatives.

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Minister of State for Finance Dr. Kharbash
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10. (C) In the meeting with MinState Finance Dr. Kharbash,
Levey reiterated the concerns with Iran and noted that major
investors are shying away from Iran. He encouraged the UAE
to engage quietly with significant money managers that it
deals with in order to urge them to steer clear of Iran on
account of its deceptive financial practices. Dr. Kharbash
noted that since the major investing is done in the US and in
Europe it may be more beneficial to go directly to the
Europeans. Levey noted that since the UAE is such a
significant financial customer its voice would be very
persuasive: &Your voice can add to and complement ours.8


11. (U) U/S Levey has reviewed this cable.
QUINN